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Hello, and thank you for standing by for JD.com's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JD.com's First Quarter 2026 Earnings Conference Call. With us today are CEO of JD.com, Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2025.

Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on the IR website, which applies to this call. We'll discuss certain non-GAAP financial measures, and also please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note, all figures mentioned in this call are in RMB, unless otherwise stated.

Now let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our first quarter 2026 earnings conference call. We kicked off 2026 on firm ground. In Q1, our total revenues grew by 4.9% year-on-year, marking a sequentially accelerated pace as key growth drivers stayed firmly on track. We saw a sequential rebound in electronics and home appliances categories, while our general merchandise, marketplace and marketing revenues maintained double-digit growth trajectory in the quarter. Moreover, our profitability continued to see steady growth. JD Retail's operating margin expanded by 0.7 percentage points year-on-year to 5.6% in the quarter, nearing historical highs. This expansion achieved against a high comparison base for margin underscores our operational resilience and healthy mix shift.

Our new business segment also delivered a meaningful sequential loss reduction in the quarter, led by improved efficiency at JD Food Delivery, while Jingxi and international business maintained prudent investment discipline. Overall, we are pleased with this strong start to the year with our emerging growth drivers taking solid shape, while our profitability across all segments steadily trending upward.

Moving to our operational highlights. I would like to share 3 areas of robust progress we made during the first quarter. First, we maintained robust momentum in both user base expansion and engagement. In Q1, both our quarterly active customer and annual active customer base grew by over 20% year-on-year with AAC hitting a new record. This growth was powered by both healthy organic user growth in core JD Retail and strategic contributions from our new businesses, including food delivery and Jingxi.

Notably, JD Plus members, our most loyal and high-value user group, delivered another quarter of double-digit year-on-year growth in membership scale. Beyond scale, the quality of our user engagement is reaching new heights. Our quarterly customer shopping frequency rose by a notable 37% year-on-year in Q1, a powerful testament to the synergies we are successfully unlocking across our core retail engine and new business initiatives. This new momentum in both scale and frequency provides a solid foundation for us to further optimize the overall value of our user ecosystem. As our user base continues its rapid growth over multiple consecutive quarters, our strategic focus is clear, fostering deeper loyalty and driving the upward migration of user quality are the key next steps towards advancing our long-term growth road map.

Second, our core retail business demonstrated strong resilience in Q1. We delivered revenue growth in line with expectations while driving operation margin towards historical peaks despite notable near-term headwinds, including the high trading base and rising product prices for electronics. This performance underscores the enduring strength of our supply chain-driven model, which consistently enables us to navigate market cycles while delivering a steady upward trending performance. Q1 JD Retail's revenues grew by 1.8% year-on-year with broad-based sequential acceleration across all revenue streams. Looking at category performance in Q1, while revenues of electronics and home appliances were down 8.4% year-on-year, this still represents a sequential improvement.

Moving ahead, while we navigate ongoing external headwinds in Q2, we remain confident in a stronger performance in electronics and home appliances in the second half of the year. Our confidence is rooted in our continuous efforts to strengthen our supply chain capabilities, prioritize superior user experience and drive systemic cost optimization and efficiency gains.

Our general merchandise category remains a standout with revenue growth accelerating sequentially to 14.9% year-on-year in Q1, led by supermarket, health care, home goods, apparel, among others. Following 6 consecutive quarters of strong double-digit growth, general merchandise has contributed over half of our total GMV, solidifying its position as an increasingly important growth driver. We maintain a positive outlook for this momentum to continue throughout 2026 as we leverage our supply chain advantages and increasing scale benefits to continue to provide our users with diversified, reliable product offerings, competitive pricing and premium services. With a vast total addressable market and deepening user mind share, we are well positioned to capture the significant market opportunities ahead.

JD Retail's advertising and commission revenues have become a powerful engine for high-quality growth. We are pleased to report another quarter of strong double-digit growth in retail advertising and commission revenues for Q1. This performance served as a primary catalyst for the 18.8% year-on-year growth in our total marketplace and marketing revenues at the group level. As a high-margin business, advertising and commission continues to structurally optimize our revenue mix, providing a resilient foundation for margin expansion.

We expect advertising and commission revenues to remain an important growth driver for JD Retail throughout 2026, fueled by the following factors: our supply chain strength, expanding user base, enhanced 3P ecosystem and traffic allocation efficiency, optimized AI-powered advertising conversion and deepening synergies across our businesses.

Notably, JD Food Delivery business is already proving its strategic value. contributing an incremental 3% to advertising revenues in Q1. By effectively expanding our user touch points, food delivery is creating high-frequency monetization opportunities that complement our core retail operations. In addition to top line resilience, another compelling highlight this quarter is the encouraging expansion of JD Retail's profitability. Operating profit surged by 16.5% year-on-year to RMB 15 billion, reaching a record high for quarterly profit and driving operating margin to 5.6% against the challenging external complexities we outlined earlier.

This is fundamentally anchored in our supply chain strengths, which continue to yield expanding economies of scale and optimized procurement efficiencies. This strength fueled a broad-based gross margin expansion across our categories, leading retail's gross margin to a remarkable 18.6% in the quarter, up 1.8 percentage points year-on-year. This margin uplift was further amplified by a favorable revenue mix shift, particularly the increased contribution from high-margin streams such as advertising and commissions. We believe JD Retail's margin profile is a clear reflection of our evolving structural efficiencies, which we expect to provide further headroom for optimization going forward.

Moving on to our new business segment. We are beginning to see the fruits of our efficiency-oriented strategy marked by a significant sequential narrowing of losses and deepening synergies with our core retail businesses. In Q1, JD Food Delivery achieved the steepest sequential reduction in loss to date. While sustaining healthy order volumes, food delivery continued to improve its operating efficiency and diversify revenue streams, resulting in material improvement in unit economics. This progress underscores our commitment to rational, healthy development of the business and reinforces our clear stance against evolution within the sector. We fully embrace the regulatory guidance and will continue to align our business strategy with full compliance, prioritizing operational efficiency and high-quality growth as we move forward.

For Jingxi and Joybuy, both initiatives advanced steadily in line with their strategic road map while adhering to prudent investment discipline, Jingxi continued to deepen its penetration in lower-tier markets, particularly Tier 6 and rural townships, successfully tapping into new user growth opportunities for our platform. Joybuy has seen solid momentum since its official launch in March with order volume and user retention trending healthily. By the end of Q1, its same and next-day delivery service spanned over 30 major European cities, serving a population of over 40 million.

Collectively, the total investment in our new business segment narrowed by over 30% sequentially. This was driven by our rational expansion strategy and an efficiency-first operating philosophy. Building on this solid execution in Q1, we now have clearer visibility to further deliver on our efficiency-oriented investment goals for the new business segment throughout the full year.

We also continue to integrate AI across our entire value chain from demand identification and stimulation, 1P and 3P supply sourcing to autonomous logistics and premium customer services. In particular, we made further headway in logistics automation. In Q1, JD Logistics launched its next-generation LangzuTech Packer robotic arm. This proprietary technology is optimized for handling packages of diverse sizes and shapes as well as automated cage loading. This milestone marks the successful transition of this technology from the lab to real-world operations and enables us to significantly boost our sorting efficiency and competitive edge.

Additionally, our AI-powered digital human, JoyStreamer has transitioned from a functional tool to an intelligent AI agent with the number of merchants and live streaming sessions that utilize this technology surging tenfold year-on-year in Q1. Our goal is simple: to translate AI innovations into tangible retail experiences and sustainable value. We are well positioned to lead at the forefront of AI commerce and capture the vast opportunities ahead.

In summary, Q1 has been defined by strong execution and strategic consistency. Our performance across all segments has validated our road map, contributing to both resilient top line growth and robust profitability. With this solid foundation, we are confident in our full year trajectory and the long-term prospects. We will maintain the operational activities necessary to proactively navigate Q2 fluctuations, including a high trading base and rising product prices for electronics while fully leveraging our supply chain-driven model. Our commitment remains unwavering to scale our business by delivering a premium user experience with continuous cost optimization and efficiency gains.

With that, let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thanks for joining the call today. In the first quarter, our strategic execution remained firmly on track as we delivered a resilient overall financial performance. Total revenues grew by 5% year-on-year, while non-GAAP net profit attributable to ordinary shareholders came in at RMB 7.4 billion, reflecting a strengthened sequential momentum across both our top and bottom lines. Notably, our core retail segment returned to growth this quarter while delivering healthy year-on-year profit expansion. We also recorded a significant sequential loss narrowing in our new business segment, led by consecutive loss reductions in food delivery.

Alongside our resilient financial results, we remain fully committed to shareholder return. During the first quarter, we repurchased a total of approximately 44.5 million Class A ordinary shares, equivalent to 22.3 million ADS for a total of USD 631 million. This represents around 1.6% of our total ordinary shares outstanding as of December 31, 2025. In addition, we completed our annual cash dividend payment in April, totaling approximately USD 1.4 billion or $1 per ADS. Our continuous execution of our shareholder return plan underscores our strong conviction in JD's long-term value creation.

Now let's go through our Q1 financial performance. Our total net revenues were up 5% year-on-year to RMB 316 billion in Q1. Breaking down the mix, product revenues were up 1% year-on-year, driven by a 15% surge in general merchandise, which effectively cushioned the temporary decline in electronics and home appliances against a high trading base. Both categories saw sequential growth acceleration. Notably, general merchandise has extended its double-digit growth streak to 6 consecutive quarters. Within this, supermarket outperformed by sustaining its double-digit growth momentum, which further accelerated in Q1 compared to the previous quarter.

As we move ahead, we expect the impact of the high trading days and rising product price for electronics to persist in Q2, which will temper the growth trajectory of electronics and home appliances, but we remain confident in a stronger performance in the second half of the year. Service revenues grew by 21% year-on-year in Q1. Within this, marketplace and marketing revenues rose 19%. Advertising revenues remained a key driver, posting its sixth consecutive quarter of double-digit growth. By optimizing traffic allocation and conversion, we have effectively translated robust user engagement into superior ROI for our brands and merchants, a trend we expect to sustain throughout the year. Logistics and other service revenues were up 22% year-on-year. This growth was driven by both incremental delivery revenues from our food delivery business and the robust performance across JD Logistics' diverse service offerings.

Now let's turn to our segment performance. JD Retail revenues were up 2% year-on-year in Q1. While we continue to navigate near-term headwinds in electronics and home appliances, we remain confident in a second half rebound in those categories. Meanwhile, our emerging growth drivers, including general merchandise and marketplace and marketing services are expected to sustain their robust momentum. JD Retail's gross margin expanded by 1.8 percentage points year-on-year to an impressive 18.6% in the quarter. This expansion was attributable to our enhanced supply chain capabilities, which led to gross margin appreciation across all major categories.

In addition, it also reflected a favorable mix shift as our high-margin general merchandise and marketplace and marketing revenues outpaced the overall growth. Consequently, JD Retail's non-GAAP operating income increased by 16% year-on-year to RMB 15 billion in Q1, reaching the highest quarterly level for JD Retail, with operating margin rising 70 bps to 5.6%. This was achieved through a strategic balance of gross margin expansion, marketing efficiency and increasing investment in R&D for long-term growth. Notably, JD Retail's marketing expense ratio has declined year-on-year for 3 consecutive quarters, a strong testament to the deepening synergies with our new business initiatives.

Moving to JD Logistics. Its revenues grew by 29% year-on-year in Q1, driven by incremental contribution from food delivery. On the profitability front, JD Logistics non-GAAP operating income surged by 600% year-on-year in Q1. This exponential growth was driven by technological leverage from our AI and robotics initiatives alongside broader operational optimization. In our new business, revenues came in at RMB 6.3 billion, reflecting a moderated pace due to the resegmentation of our on-demand delivery revenues from new business to JD Logistics. Non-GAAP operating loss in new business narrowed significantly on a sequential basis to RMB 10.4 billion, led by JD Food Delivery, while Jingxi and international business remained disciplined in their investments. In particular, JD Food Delivery delivered its most significant sequential loss reduction since inception, driven by its improved unit economics as we continue to boost operating efficiency and diversified revenue streams, combined with a disciplined rational response to market dynamics.

Turning to our consolidated profit performance. Group level gross margin expanded by 90 bps year-on-year to 16.8% in Q1. This expansion was primarily driven by the strong performance of JD Retail, serving as a clear validation of the structural progress that we have made in broadening and strengthening our margin drivers. In terms of OpEx, total operating expense as a percentage of revenues increased year-on-year in the quarter, primarily reflecting increased marketing spending in JD Food Delivery and higher R&D investment to fuel our long-term growth and efficiency improvement. Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 7.4 billion in Q1 representing a non-GAAP net margin of 2.3%. Regarding our liquidity, last 12 months free cash flow as of the end of Q1 stood at RMB 22 billion compared to RMB 38 billion in the prior year. This primarily reflects cash outflows associated with the trading program alongside fluctuations in operating income. By the end of Q1, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 216 billion.

In summary, Q1 was another quarter that underscored the resilience and adaptability of our supply chain-driven model. We achieved a sequential acceleration in top line growth while successfully navigating a complex external environment. Both JD Retail and new business delivered robust profitability improvements and steadily moved along the strategic road map. Our scalable AI applications are increasingly transforming our core assets into a distinct competitive mode in the era of AI commerce. With this solid foundation, we are firmly committed to unlocking long-term value for our shareholders. This commitment is underpinned by our proven track record of growth, a clear trend of margin expansion and our solid shareholder returns.

With that, I will turn it back to Sean. Thank you.

Thank you, Sandy, Ian. For the Q&A session, you are welcome to ask questions in English or Chinese. Our management will answer the question in Chinese, and we will provide English translation for convenience purpose only. In any case of discrepancy, please refer to our management statement in the original language.

Operator, we can open the call for Q&A now.

[Operator Instructions] Your first question today comes from Kenneth Fong with UBS.

[Foreign Language] Congrats on the strong quarter. My first question is on the growth. Despite facing a high base in the first quarter, JD Retail still delivered better-than-expected growth and maintained solid performance even as overall market decelerate in March. Has management observed any shift in consumer behavior, particularly in the context of price increase in electronic categories? How should we think about the growth trend over the next few quarters? And my second question is about the margin. Against the backdrop of macro uncertainty, intensified industry competition and increased platform subsidies alongside with a rising ASP in electronic products, how should we assess JDR margin trajectory going forward?

[Foreign Language]

[Interpreted] Thank you, Kenny. Let me answer your first question regarding growth. In Q1, JD Retail delivered a solid performance with revenue growth accelerating Q-on-Q for electronics and home appliance while our growth was impacted by the high base from trading subsidies last year, we leveraged our supply chain capabilities and strong user mind share to win even greater trust from users, which helped us further consolidate our market leadership. For general merchandise category, revenue growth maintained a double-digit pace and further accelerated to 15% year-on-year. Notably, our supermarket category reported double-digit growth for the ninth consecutive quarter. This clearly shows that our growing user mind share in the general merchandise category.

[Foreign Language]

[Interpreted] Regarding the impact of price hikes in the 3C and home appliance industries, so yes, due to the rising memory costs, we have seen industry-wide price hikes for smartphones and PCs since March. This round of price increases is sharp and widespread. So in short term, it indeed dampens consumer demand to some extent. At the same time, we are seeing consumer purchase are shifting toward high -- mid- to high-end models and top-tier brands. So -- but in a challenging time, JD's unique proposition becomes even more clear. We will leverage our efficiency of our supply chain to bring users a better experience in both price and service. At the same time, we'll help brands achieve more efficient sales with greater certainty. Our unique competitive edge is even more pronounced for the high end -- mid- to high-end models and top-tier brands. So overall, as a result, we believe our market position will further solidify.

[Foreign Language]

[Interpreted] Looking at the full year, the rest of the year, in the second quarter, sales of electronics and home appliance are expected to continue to face temporary pressure. This is due to the even higher base from trade-in program last year, combined with the impact of price hikes on smartphones and PCs impacting consumer sentiment. We will continue to strengthen our mind share while helping brands achieve more certain sales.

Moving into the second half of this year, we have stronger confidence in a growth acceleration, especially for home appliance category as the comparison base returns to normal and the continuous expansion of our omnichannel sales network further create greater sales potential for home appliance category. At the same time, we are confident in the healthy growth for both general merchandise and advertising and commission revenues. JD's growth engines are becoming more diversified. This gives us confidence to deliver healthy growth for the full year even in a volatile year.

[Foreign Language]

[Interpreted] In the first quarter, JD Retail achieved double-digit growth in operating profit. Its operating margin also expanded steadily to 5.6%. This was primarily driven by: first, gross margin expansion. For both our mature electronics and home appliances and fast-growing general merchandise categories, we have leveraged our supply chain capabilities to drive industry efficiency. While creating value for brands, we have also enhanced our own profitability, achieving year-on-year expansion in gross margins across categories. In the meantime, marketing efficiency improvement. JD Retail's marketing expense and expense ratio have seen year-on-year optimization for 3 consecutive quarters. As new businesses, including JD Food Delivery and Jingxi effectively drive traffic growth for our platform, we are allocating marketing resources with greater precision and efficiency, thereby enhancing the overall return on our marketing expenses.

Lastly, while improving our gross margin and marketing efficiency, we remain deeply committed to R&D development, particularly in AI. In Q1, our R&D expense continued to meaningfully increase and is expected to maintain an upward trend for some time ahead. We believe such investments will gradually translate to operational benefits, driving AI-powered efficiency gains and further optimizing our overall cost structure.

[Foreign Language]

[Interpreted] Looking ahead, our Q1 performance already further validates JD Retail's ability to deliver steady margin expansion over time. So we remain firmly committed to our long-term high single-digit margin target. The key drivers of this include: first, our 1P capabilities. We'll continue to enhance our 1P supply chain strength and leverage scale benefits to drive consistent product sales gross margin expansion. JD Retail's gross margin has delivered year-on-year improvement for 16 consecutive quarters, and we believe there is still upside potential.

Second, category improvement. We see meaningful margin upside in categories, including supermarket. Additionally, as we continue to optimize the product mix within our electronics and home appliances categories, we expect further margin expansion over the long term.

Third, platform ecosystem. We have been driving the healthy development of our platform ecosystem. This will support our high-margin service revenues such as commission and advertising to grow at a robust pace, contributing to our overall margin expansion. That said, we are still at a lower take rate level compared to the industry, and we believe there is substantial potential for improvement for us.

In the long term, as China's largest retailer with supply chain at its core, JD has the industry's most diverse application scenarios for AI and automation. This presents significant potential for us to continuously enhance user experience, reduce costs and drive greater efficiencies.

Your next question comes from Ronald Keung with Goldman Sachs.

[Foreign Language] First is about international since that you've launched Joybuy across 6 countries in Europe, how should we frame the near-term investment intensity to drive a critical order volume scale? And how do you think about the longer-term impact on a kind of next few year basis on new business loss? And the ROI from this investment? And second is on AI agents, which are increasingly driving consumer search and purchasing. So how will JD leverage the unique moats as China's largest retailer in this? And what are your defensive or offensive strategies in light of agent-to-agent interactions and on partnerships?

[Foreign Language]

[Interpreted] Thank you, Ronald, for your question. First, on Joybuy. Joybuy was officially launched on March 16. So it leveraged JD's supply chain capabilities and localized operation. Now Joybuy partners with top global brands to offer European users a full category of products at competitive pricing. At the same time, backed by our self-built logistic network in Europe, Joybuy is bringing JD signature same and next-day delivery speed to -- that we offer in China to European consumers. Currently, Joybuy maintains an encouragingly high user rating on Trustpilot, a leading consumer review platform. Our high-quality products and excellent delivery experience are helping us winning trust of local customers.

[Foreign Language]

[Interpreted] In terms of investment, in Q1, investment of our international business remained stable Q-on-Q as we keep improving operating efficiency over the next few quarters where we will execute our established strategy -- as our business grows healthily, the overall investment may gradually increase as well. That said, as order volume grows, the economy of scale will kick in and continuously improve our unit economics. So overall, we believe our international business investment is highly manageable and remains in line with our initial expectations.

[Foreign Language]

[Interpreted] Looking ahead, international expansion is a long-term strategy for JD. We will steadily expand our footprint and build our capabilities. In the meantime, we will strictly maintain our financial discipline and focus on ROI to drive healthy sustainable growth. In terms of capability building, we'll focus on -- focus our investment on key supply chain areas, including product fulfillment, technology systems and et cetera. This will allow us to bring a more competitive price -- product offering to European user, improve delivery experience and further differentiate the Joybuy experience. Over the long run, this investment will translate into better user retention, unlock economic scale and drive long-term ROI. We are confident that JD's core supply chain mode, especially our highly efficient 1P model, combined with strong logistic capabilities, give us the potential to redefine industry efficiency and user experience on a global scale.

[Foreign Language]

[Interpreted] Regarding the second question on AI, we believe no matter how technology evolves, whether AI assisted shopping or -- the essence of retail remains unchanged. It has always centered on delivering better user experience, lower cost and higher efficiency to meet users' continuous pursuit of better product, price and service. This is also the core mode of JD that we have been building over the past 2 decades of deep investment in supply chain. Today, we are leveraging new technologies, including AI and robotics to further enhance the user experience while reducing cost and improving efficiency. Let me walk you through a few examples.

[Foreign Language]

[Interpreted] On the demand side, we are making a comprehensive upgrade with our self-developed AI agent called [indiscernible] to help us more precisely identify, stimulate and match consumer demand. [indiscernible] has provided a more efficient and convenient shopping experience within the JD app.

[Foreign Language]

[Interpreted] In Q1, we have seen [indiscernible] demonstrate strong growth momentum with its quarterly active users growing by over 200% year-on-year, while the growth of user engagement was even more robust, increasing by over 300% year-on-year.

[Foreign Language]

[Interpreted] On internal workflow, our procurement and sales agent can analyze front-end market demand to uncover new business opportunities and then source more suitable merchants and products. Our procurement and sales agent can also automate routine operational tasks such as merchant and product management, inventory management and marketing activities, enabling our procurement team to operate and make decisions with greater efficiency. At the same time, we have developed a suite of AI tools to help merchants enhance their operational efficiency, including marketing content generation, JoyStreamer, our digital human live streaming solution and AI-powered customer service.

[Foreign Language]

[Interpreted] And on the fulfillment side, we are broadly deploying AI and robotic technology to continuously drive up our automation and robotics coverage. Currently, JD's LangzuTech series of robots is able to cover the entire logistics chain and has been deployed at a scale -- at a global scale, gradually delivering cost reduction and efficiency gain.

[Foreign Language]

[Interpreted] So therefore, you can see by deploying this agent, we are connecting and upgrading individual process into a seamless end-to-end workflow, which essentially building an agent-to-agent framework. By replacing inefficient intermediary layers, we are positioned to realize a step change in the overall efficiency.

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language] As the food delivery landscape gradually improves, we understand that JD remains committed to investing in this area to drive new user acquisition and also cross-selling. So can management share whether the goal is to operate the business profitably? Or furthermore, does JD actually aim to break even at the same time as the competitors? Or does management view food delivery as a long-term strategic investment that will continue to operate at a slight loss or maybe just near a breakeven point?

And then second question is that what is management view on the future FMCG and also the fresh category landscape? So what could be the share split between the large supermarket chain, the online, the on-demand, the quick commerce? What will be the preferred models that JD want and which model will be more profitable? And then any views and thoughts on the competition landscape evolving?

[Foreign Language]

[Interpreted] First, in Q1, while keeping healthy order volume, JD Food Delivery achieved biggest sequential loss reduction to date, with solid progress in UE improvement. On food delivery revenues, as we continued to optimize operations and upgrade advertising system, total revenues of commission and advertising surged nearly 2x on a quarter-on-quarter basis in Q1. At the same time, we maintain a rational approach amidst industry-wide subsidy competition. We continue to refine our operations and marketing efficiency across different user groups and regions. Furthermore, through supply chain innovation, we are advancing the growth of this business. We also fully implement regulatory requirements and remain committed to compliant operations.

[Foreign Language]

[Interpreted] We believe our food delivery business will eventually achieve profitability. However, JD Food delivery is not a stand-alone business. We will be unlocking its synergetic value within our business ecosystem. On users front, first, user scale. JD Food Delivery has been driving healthy growth in traffic and user base for our platform. In Q1, both our DAU and quarterly active customers increased by over 20% year-on-year, and the number of our annual active customers reached a record high. This also contributed to our advertising revenue growth. Second, user engagement as food delivery effectively fulfills the demand of our existing high-quality users. It helped to drive a 37% year-on-year increase in user shopping frequency on our platform. Third, cross-sales. We've also seen stronger cross-category purchases among food delivery users, particularly in supermarket categories and our on-demand retail offering.

[Foreign Language]

[Interpreted] On the supply side, food delivery also enriches the location-based supplies on our platform, spanning categories from dining and supermarket to general merchandise. This also enables us to deepen partnerships with merchants and brands. On the fulfillment side, we will be unlocking and testing synergies between food delivery and logistics fulfillment to develop a robust last mile infrastructure. This not only enhances our on-demand delivery capacity but accelerates the coordination and optimization of our overall logistics operations and management.

[Foreign Language]

[Interpreted] Food delivery and on-demand retail are long-term strategies for JD. We will drive healthy development of the businesses through a long-term perspective.

[Foreign Language]

[Interpreted] Let me answer Alicia's second question on supermarket. So first, China supermarket sector has a massive market size nearing RMB 10 trillion in scale, yet it remains highly fragmented. So this indicates significant room for potential cost optimization and efficiency gain as well as for the growth in online penetration. Within the supermarket category, we operate multiple models, including 1P model, which focus on delivering a reliable consumer experience, 3P platform model, which offers selection and diversity and additionally, the on-demand retail model, which has been growing rapidly on JD in recent years. So these models are not simply replacing one another. Instead, they address diverse consumer demands across different shopping scenario by emphasizing distinct advantage in efficiency, timelessness and selection.

[Foreign Language]

[Interpreted] As a B2C retailer with deep supply chain expertise, JD supermarket holds significant competitive advantage across product selections, supply chain and warehouse management, cost and price competitiveness and user experience despite intense market competition. As the largest supermarket in China, JD supermarket has demonstrated remarkable growth resilience, achieving double-digit revenue growth for 9 consecutive quarter.

On profitability, we continue to enhance the profitability of supermarket category by leveraging our scale advantage and supply chain capabilities. Looking ahead, we still see substantial runway for improvement in both gross margin and our fulfillment expense ratio, allowing us to unleash results from our scale and sustain steady growth while gradually expanding our profitability. We believe that competition in supermarket sector will ultimately return to the focus on user experience, cost and efficiency by leveraging our continuously improving self-operated supply chain capability, JD supermarket delivers better product at lower price to customers while helping brands achieve consistent and incremental sales. We are highly confident that in the long -- in the long-term healthy growth of supermarket, which is becoming a key growth engine for us in the coming years.

Your next question comes from Thomas Chong with Jefferies.

[Foreign Language] I have two questions. My first question is about the latest updates about our ecosystem strategies, including number of 3P merchants contribution as well as the outlook over the next few quarters. And my second question is about capital return. Can management share the latest updates about the return to shareholders?

[Foreign Language]

[Interpreted] Our platform ecosystem always centers on user experience, lower cost and enhance the efficiency. By leveraging different business models, we provide the best combination of products, price and services to meet diverse consumer needs. We've made solid progress in our platform ecosystem development. Let me share a few key indicators that maintained rapid growth in Q1.

First, our active merchant base. It maintained a triple-digit year-on-year growth rate in Q1. We've onboarded more high-quality brands and industrial belt merchants, providing users with a more diverse product supply. Meanwhile, our food delivery business has also brought in a large number of quality restaurant merchants, further expanding our service scope. Second, users. We have seen positive feedback from users. The number of users who shopped 3P offerings on our platform grew at a fast pace, outpacing the growth of our total users. This also supported the fast growth of 3P order volume, which accounted for over 50% of our total orders in Q1.

[Foreign Language]

[Interpreted] From a financial perspective, in Q1, our 3P GMV grew faster than 1P and total GMV. More importantly, our marketplace and marketing revenues have delivered double-digit growth for 6 consecutive quarters. The increasing contribution from these high-margin revenue streams continues to drive our overall profitability. Over the long term, we believe 3P GMV contribution will surpass 1P. Our platform ecosystem will become a key driver for both our revenue growth and margin expansion.

[Foreign Language]

[Interpreted] Regarding shareholder return, in the first quarter, we repurchased a total of around 44.5 million ordinary shares, equivalent to 22.3 million ADS for a total of USD 631 million, representing 1.6% of our total ordinary shares outstanding as of the end of 2025. The remaining amount of our ongoing repurchase program is USD 1.4 billion, and the expire date will be in August next year. We expect to continue to execute our share buyback at planned pace. In addition, we announced the annual cash dividend of $1 per ADS for the year of 2025 in March and completed payment in April as planned.

Going forward, we remain committed to returning value to our shareholders through dividends and share buybacks. At the same time, we will maintain focus on achieving healthy long-term growth in business scale, profitability and cash flow. We aim to share JD's success with our shareholders in multiple ways.

Thank you. That's all the questions we can take today. So let me just wrap up. I think we are running over time. Thank you for joining us on the call today, and thanks for your questions. If you have further questions, please contact me and the IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, and thank you for standing by for JD.com's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JD.com's Fourth Quarter and Full Year 2025 Earnings Conference Call. With us today are CEO of JD.com, Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results, then we'll open the call to questions from analysts.

Please note, unless otherwise stated, all comparisons in this call will be against our results from the comparable period of 2024. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on our IR website, which applies to this call.

We'll discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measure in the earnings press release. Please also note, all figures mentioned in this call are in RMB, unless otherwise stated.

Now let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our fourth quarter and full year 2025 earnings conference call. We closed Q4 with results in line with expectations as we navigated short-term challenges while delivering on solid overall full year performance for 2025.

During Q4, despite a high year-on-year comparison base in electronics and home appliances, our top line remains resilient, thanks to the continued strong momentum in both our general merchandise categories and marketplace and marketing revenues.

Our profitability, our core business, JD Retail achieved a notable gross margin expansion in Q4 as we further leveraged our supply chain advantages. We strategically invested some of these gains into our price competitiveness, particularly in electronics and home appliances categories as well as in R&D capabilities and talent to secure a long-term edge.

This slightly tempered retail's margin expansion in the quarter, but the impact was well absorbed by our increasingly diversified profit streams, including high-margin marketplace and marketing services and margin improvement in categories such as supermarket and health care. Beyond core retail, our new businesses continued to report steady efficiency gains and a sequential decline in total investments.

Beyond the quarterly fluctuation, 2025 remained a year of solid execution where we delivered on our full year expectations. We have made encouraging strides across our key long-term growth drivers. User base and engagement gained significant momentum and our core retail segment accelerated back to double-digit top line growth.

Notably, we achieved this while expanding JD Retail operating margin for the sixth consecutive year, despite a highly competitive landscape, and we are expanding our TAM with several promising new business initiatives.

This solid progress is rooted in our deepening supply chain capabilities, which remain the engine for delivering superior user experience, optimized and enhanced operating efficiency. This is the backbone of our business model, not only supporting our core retail business, but also fueling our expansion into the new markets, our strategic initiatives. We are confident that these strategic pillars position us for more sustainable and profitable growth.

Moving into our operational highlights. I'd like to share 3 highlights from Q4 and full year 2025 as well as our thoughts for 2026. First, our user base expanded in both scale and depth [Technical Difficulty]. Our quarterly active customers grew by 30% year-on-year in Q4, capping a year where we exceeded 700 million annual active customers.

This growth was powered by the organic user growth of our core retail business and further accelerated by new strategic initiatives, including JD Food Delivery and Jingxi. High-value users also hit a new milestone. Our active JD Plus user base sustained double-digit [Audio Gap] surpassing [Audio Gap] by year-end.

What is even more encouraging is the quality of user growth. User shopping frequency surged by over 40% year-on-year for the full year with broad-based gains across all user groups, including new and existing users as well as Plus members.

In addition to user acquisition, JD Food Delivery also played an important role in this frequency lift. We view the expansion of user base and engagement as a long-term strategic driver for our business and expect it will further amplify in 2026 and beyond.

Second, our core retail business demonstrated remarkable resiliency in Q4, maintaining stable margin in the quarter despite short-term top line headwinds. On a full year basis, JD Retail delivered strong double-digit growth in both revenue and operating profit with operating margins expanding by 52 bps to 4.6%.

Viewed through a long-term lens, this consistent trajectory of JD Retail's growth and margin expansion over multiple years stands as a powerful testament to the resilience of our supply chain-driven model.

While Q4 revenue edged down to 1.7% year-on-year due to softness of electronics and home appliance categories, we have proactively strengthened our supply chain capabilities and deepened user mind share. These efforts are already paying off with improved momentum year-to-date in 2026. Furthermore, we expect to be benefiting from the resumed trade-in program this year, which will provide a constructive backdrop for industry growth.

Turning to general merchandise. Its performance remained strong with revenue up 12.1% year-on-year in Q4 and 15.3% for the full year. Supermarket revenue maintained double-digit growth in Q4. For the full year, supermarket growth reached mid-teens, accompanied by steady growth and operating margin expansion.

Our fashion categories also achieved significant gains in both top line and user mind share expansion throughout 2025, with healthy growth across user base, shopping frequency, ARPU and ticket size. These results were driven entirely by the team's execution rather than external tailwinds.

We are confident in sustaining the general merchandise momentum as our category mix continues to evolve towards a more diversified structure. Another exciting emerging growth driver for JD Retail is advertising revenue, which boosted our marketplace and marketing revenues to grow 15% in Q4 and 18.9% year-on-year for the full year.

The robust growth was fueled by our optimized traffic allocation, enhanced conversion efficiency and the roll out of our AI-powered algorithms and agents for our suppliers and merchants.

We are also seeing a strategic shift where advertisers are reallocating budgets towards platforms like JD as we are regarded as the most consistent daily sales platform, the premium designation for brand building and the platform that offers the highest return throughout a product's entire life cycle.

Notably, the synergy with JD Food Delivery is starting to bear fruit, contributing an incremental 2% to 3% to ad revenue in Q4. We remain confident in sustaining our advertising revenue momentum in 2026.

The third highlight is the solid progress of our new businesses. Within the segment, JD Food Delivery continued to drive healthy progress in Q4. We maintained steady order momentum while further optimizing our investment, further reducing the total investment scale by nearly 20% quarter-on-quarter.

Since its inception, JD Food Delivery has sustained sequential loss reduction every single quarter, a direct result of our relentless focus on improving operating efficiency and an ROI-driven investment framework.

In Q4, JD Food Delivery loss rate over GMV narrowed significantly compared to a quarter ago while maintaining the scale momentum. More importantly, the strategic synergies with our core retail business are deepening. Beyond the strong user momentum mentioned earlier, both cohorts cumulative cross-selling rate and shopping frequency trended upward in Q4.

Additionally, total active merchants have increased by over 270%, which was also partially contributed by the high-quality restaurants that onboarded our platform. Looking ahead, JD Food Delivery will continue to prioritize healthy volume growth while improving its unit economics at a greater level. We expect investment efficiency in food delivery to improve further this year compared to 2025 levels.

Regarding our other new business initiatives, both Jingxi and international business are progressing on track. Jingxi continues to successfully penetrate lower tier markets, expanding both our user base and user mind share.

Furthermore, we are excited to announce that Joybuy, our online retail business in Europe, will officially launch this month. We are committed to redefining the local shopping experience by providing same-day and next-day delivery services, a move that opens up greater growth horizons for JD. We will continue to invest in these higher potential segments in a prudent and controlled matter to build our long-term sustained development.

While executing our core strategies, we are equally inspired by the transformative potential of AI. By leveraging our deep supply chain capabilities, we are embedding AI across our entire value chain, identifying and stimulating demand, sourcing 1P and 3P supply and pioneering autonomous logistics. Let me share a few samples of our AI initiatives.

First, proprietary intelligence. Our large language model, JoyAI, now supports over 1,000 real-world applications across customer experience, procurement, merchant services and operations. In 2025, JoyAI's total token invocations surged nearly 100-fold from 2024, fueling faster, smarter decision making throughout the company.

Second, demand cultivation. We are reshaping the shopping journey and enhancing user experience through AI-driven search and recommendations. Jingyan, our AI agent, surpassed 150 million annual AAC in 2025 with over 20% user penetration driven billings in GMV. We expect to double this user base in 2026.

Third, logistics automation. Parallel to the digital intelligence is our leadership in autonomous logistics. In 2025, JD Logistics continued to redefine logistics efficiency. As of the year-end, it deployed over 20 flagship LangzuTech warehouses across China. We also launched this capacity internationally, launching our first LangzuTech facility in the U.K. to efficiently support a premium 211 same day and next day fulfillment experience locally.

Furthermore, services and innovation. Our multimodal AI customer service handled over 4.2 billion user inquiries during the 11.11 promotion, achieving higher satisfaction with lower human intervention. Beyond operations, we are unlocking new consumption potential through JoyInside, our AI agent for hardware, which has partnered with 40 hardware brands to introduce a range of AI products. Sales of JoyInside-integrated products surged 20-fold during 11.11 compared to the June 18 promotion.

By harnessing AI to redefine our competitive edge, we are further equipped to enhance our user experience, lower costs and improving operating efficiency. We are well positioned to capture the opportunities arising from AI to unlock new growth frontier for 2026 and beyond, ultimately placing us at the forefront of AI commerce.

In summary, 2025 was a year of constructive progress and strategic fortitude. Despite navigating short-term macro environment and high base comparison, we remained steadfast in sharpening our supply chain edge and fortifying our foundation for the future.

As we enter 2026, we are already seeing a consistent upward trend. Our user momentum remains robust and the growth trajectory of our general merchandise and the marketplace and marketing services has carried over seamlessly into the new [Audio Gap]. In the meantime, we have continued to strengthen our competitiveness advantages across product supply, price competitiveness and fulfillment experience.

This operational strength, combined with our technological advances and disciplined ROI-focused approach to new businesses gives us great confidence in our 2026 outlook. We remain fully committed to driving sustainable, profitable growth and creating long-term value for our shareholders.

With this, I will turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thanks for joining the call today. In Q4, our total revenues grew by 2% year-on-year, and non-GAAP net profit came in at RMB 1.1 billion.

While we faced short-term headwinds in electronics and home appliances categories, our overall performance remained resilient. This stability was driven by our strategic focus on diversifying growth drivers and profit streams alongside disciplined investments in our new business.

On a full year basis, we achieved meaningful progress across our core retail segment, new businesses and user growth and engagement, reinforcing our long-term sustainable development.

As we drive business development, we remain firmly committed to delivering shareholder returns. Our Board has approved a total annual cash dividend of approximately USD 1.4 billion for 2025, representing USD 0.05 per ordinary share or USD 1 per ADS.

Furthermore, we remained active in terms of share buybacks. In 2025, we repurchased about 6.3% of our outstanding shares for a total of USD 3 billion. All of the repurchased shares have been canceled. These efforts underscore our confidence in long-term development.

Now let's go through our Q4 and full year 2025 financial performance. Total net revenues for Q4 increased by 2% year-on-year to RMB 352 billion. On the full year basis, total net revenues increased by 13% to RMB 1.3 trillion in 2025. Breaking down the mix, product revenues faced a 3% dip in Q4, mainly due to a high trading base, but grew by 10% for the full year.

By category, revenues of electronics and home appliances was down 12% in Q4, but up 7% for the full year. We have navigated this high base challenge in close collaboration with our partners and are encouraged by the improved momentum year-to-date in 2026.

On the other hand, general merchandise delivered robust results with revenues up 12% in Q4 and 15% for the full year, led by sustained momentum in our supermarket, fashion and health care categories throughout 2025. We believe this momentum will continue in 2026 as we further build our strength in these high-potential sectors.

Service revenues grew by 20% year-on-year in Q4 and 24% for the full year. Notably, marketplace and marketing revenues were up 15% and 19% for the quarter and full year, respectively.

A key driver of this was advertising revenues, which achieved double-digit growth across every quarter of 2025. We have enhanced advertising efficiency of our platform through leveraging technology as well as our surging user traffic and engagement.

Looking into 2026, we expect marketplace and marketing revenues to maintain solid growth momentum, contributing to both top line growth and profitability. Additionally, logistics and other service revenues grew by 24% year-on-year in Q4 and 27% for the full year, mainly driven by the incremental delivery returns revenues from our food delivery business.

Now let's turn to our segment performance. JD Retail revenues down 2% year-on-year in Q4, but up 11% for the full year of 2025. The quarterly decline was primarily due to the high trading base for electronics and home appliances, which was largely mitigated by growth in general merchandise and advertising revenues.

It's important to note that JD Retail is no longer a single growth driver business. We have successfully built a diversified growth metric that provides the business with multiple engines and strong resilience across different market conditions.

Notably, JD Retail's gross margin increased by 1.1 percentage points year-on-year in both Q4 and full year 2025. This consistent improvement has sustained across multiple years despite changes in the competitive landscape, reflecting our enhanced supply chain strength and a favorable mix shift.

JD Retail's non-GAAP operating income in Q4 was down 2% year-on-year with operating margin holding steady at 3.2%. The temporary pause in margin expansion this quarter was a strategic choice. We deployed supplementary subsidies for electronics and home appliances to offer competitive price and maintain market leadership while increasing OpEx through targeted investments in R&D and employee compensation to fuel future growth.

On a full year basis, JD Retail's non-GAAP operating income in 2025 grew by 25% year-on-year, with operating margin improved by 52 bps to 4.6%. Taking a long-term view, JD Retail's margin trajectory remains very healthy, climbing consistently from 2.7% in 2019, when we initiated this segment reporting, to 4.6% in 2025.

As we continue to emphasize high-margin advertising business and realize efficiency gains in categories such as supermarket, we remain on a steady and successful path towards our long-term margin targets.

Moving to JD Logistics. Its revenues grew by 22% year-on-year in Q4 and 19% for the full year with incremental contribution from food delivery. On the profitability front, JD Logistics' non-GAAP operating income was down 17% year-on-year in 2025, but up 3% in Q4.

JD Logistics remains committed to investing in elevating customer experience, expanding service capabilities in both domestic and overseas markets, and advancing AI and robotic technologies. We view this as essential investments that pave the way for JDL's long-term sustainable growth in both top and bottom line.

New businesses' revenue surged by 201% year-on-year in Q4 and 157% for the full year driven by the rapid scaling of food delivery, Jingxi and international business. The segment's non-GAAP operating loss narrowed to RMB 14.8 billion in Q4. This sequential improvement was primarily driven by the narrowing loss at JD Food Delivery, which achieved a notable reduction of about 20% in loss compared to the previous quarter, continuing its consistent trend of improvement since launch.

As we enter 2026, our priority for food delivery remains to drive healthy order volume while deepening synergies with our core retail business. We believe investment in food delivery has peaked in 2025 and will trend downward this year if market competition trends towards becoming more rational. Beyond food delivery, we will continue to explore promising opportunities in Jingxi and international business with financial discipline to ensure long-term value creation.

Moving to our consolidated profit performance. Group level gross margin expanded by 32 bps year-on-year to 15.6% in Q4 and rose 18 bps to 16% for the full year. This improvement was primarily driven by the consistent gross margin expansion of JD Retail.

Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 1.1 billion in Q4 and RMB 27 billion for the full year, representing a non-GAAP net margin of 0.3% and 2.1%, respectively.

Our near-term profitability mainly reflects our strategic investments in new businesses. We believe these initiatives will broaden the group's growth potential, driving both sustainable growth and margin improvement over the long term.

Our free cash flow for the full year of 2025 was RMB 6 billion compared to RMB 44 billion last year. This primarily reflects cash outflows associated with the trade-in program alongside fluctuations in operating income.

Our accounts receivable also recorded a sequential decline for 2 consecutive quarters, primarily due to the healthy recovery of the trade-in related receivables. We conclude the year with a robust liquidity position with cash and cash equivalents, restricted cash and short-term investments totaling RMB 225 billion as of year-end.

In summary, 2025 was a year of solid strategic progress. We achieved strong growth in our user base, accelerated core retail top line with margin expansion fueled by increasingly diversified drivers. Furthermore, our new businesses are now on a healthy, promising operating track. We have built a more resilient ecosystem.

While our business segments operated with increasing synergies, our focus remains clear. We will continue to focus on enhancing user experience, lowering costs and improving operating efficiency to deliver strong performance across our retail business top line and profitability while advancing our new business initiatives with a long-term perspective.

With that, I will turn it back to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, analysts are welcome to ask questions in Chinese or English. Our management will answer your question in Chinese and will provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in original language.

Operator, we can open the call for Q&A session now.

[Operator Instructions] Your first question comes from Ronald Keung with Goldman Sachs.

[Interpreted] First is on JD Retail 2026 growth, as electronic appliances return to a more normalized base from the second half, the general merchandise remains very healthy. So how should we think of the growth rate for JD Retail in 2026 for the first half and second half and the differences given the base?

Second is on the on-demand and food delivery. How should we think of the path to further unit economics improvement? Compared with the bigger competitors, how are we differentiating ourselves through supply chain, supply chain-driven business models? And how should we think about your determination and commitment to this business? And with the regulations and investigations on the food delivery industry, would that also contribute to the unit economics improvement?

[Foreign Language]

[Interpreted] Okay. Thank you, Ronald. So for your first question, first, our general merchandise category continues a very healthy, robust growth trajectory. Looking back at 2025, the category achieved growth faster, even factoring in the impact of trade-in program on the other category. So general merchant category served as a primary growth engine for JD Retail. Categories such as -- subcategories such as supermarket, fashion and health care all achieved very strong results.

Looking into 2026, we remain very confident in sustaining this healthy momentum. Supermarket category still has significant untapped potential in terms of user penetration and expansion of the subcategory. Fashion category, we have completed many infrastructural work such as merchant recruitment last year and will further build growth momentum on this very strong foundation. Health care category, we expect to continue maintain its industry-leading position and user mind share.

Regarding electronics and home appliance category, it continue to face high base effect in the short term. In 2026, the government trade-in program will continue, but we have to bear in mind that the government-backed cash subsidy were consumed much faster and more in first half 2025 compared to the second half 2025.

So for our electronics, home appliance category, including home appliances, cell phones, computers and digital products, will remain affected by a high base in the first half this year. However, we anticipate a sequential improvement in growth compared to the last quarter, fourth quarter of 2025 with more robust recovery expected in the second half 2026, and our market share remains very resilient.

Furthermore, we have to bear in mind that memory chip costs keep rising. So prices of mobile phones, digital products are expected to increase across the board. This may dampen consumption and affect sales volume. But at the same time, the rise of AOV will partially offset the impact of lower sales to a certain extent. We'll continue to strengthen our user mind share and drive sales by further reinforcing our supply chain capability, expanding our proactive off-line presence and enhancing overall service experience.

Meanwhile, AI and emerging technologies are creating numerous opportunity for innovation and new product categories further demonstrating our strength of supply chain. While initial data contribution from this new AI-related products remain modest relative to our -- the current scale of this category, but we see significant opportunities and shifts. And we will work closely with brand owners and suppliers to respond rapidly and develop new products and meet evolving user needs through the swift application of new technology.

Looking ahead to 2026. First, our growth drivers are becoming more diversified. General merchandise category maintains a healthy growth trend, while service revenue, including advertising will also sustain rapid growth momentum.

Second, we expect electronics and home appliance category to remain impacted by a high base in the first half this year and with growth in the second half to accelerate better than the first half. Overall, we will maintain our market share and user mind share. At the same time, we'll continuously leverage technological innovation to drive industry progress.

Third, supported by the steady improvement in JD's traffic, user base and shopping frequency, we are confident to achieving -- in achieving healthy and high-quality growth for the full year 2026.

[Foreign Language]

[Interpreted] Regarding your second question. So while food delivery business -- our food delivery business remains in its early stage in 2025, we actively invested in both operations and R&D. Looking at this year 2026, we'll continue to strengthen our capabilities and onboard more quality merchants and products and enhance user experience.

At the same time, we'll begin generating revenue through offering merchant services, achieving an orderly and rational monetization. So our goal is to sustain healthy scaling of this business while continuously improving operational efficiency. We expect total investment in food delivery to decrease in 2026 compared to 2025. Well, that also, of course, depends on the market competition dynamics.

How we do this? First, JD Food Delivery's differentiating advantage includes our commitment to our positioning in high-quality food delivery. Second, superior service quality driven by full-time riders. Third, the synergetic integration across JD ecosystem, leveraging on our strong supply chain advantage.

In terms of improving UE, we have clear drivers. First, more diversified revenue streams; second, continuous optimization of subsidy efficiency, including targeted subsidy tailored to different users and regions; third, enhanced delivery efficiency driven by economic scale that accompany healthy order volume growth.

It's also worth noting that our Seven Fresh Kitchen, which is a highly innovative and differentiated business model, is progressing well. It's deeply integrated with JD supply chain capability, leverage strong synergy with our on-demand retail business. As of the end of February, Seven Fresh Kitchen operational footprint has expanded to over 50 kitchen locations and we welcome analysts and investors to try it out.

Regarding the long-term positioning, food delivery and on-demand retail is a long-term strategy for JD, will drive our strategic progress with a long-term perspective, continuously enhancing operational efficiency to drive profitability improvement.

At the same time, we'll continue to unlock potential synergy between food delivery and our core retail business, fueling the company's long-term healthy growth. In 2025, our food delivery provided -- proved to be a strategic engine for user growth, effectively acquiring new users and significantly boosting purchase frequency across our platform.

In 2026, we expect to see a further unlocking of synergies driven by robust cross-selling and incremental growth in advertising revenue. Lastly, regarding the food delivery regulation, first, we support and welcome regulatory oversight that maintains a fair and competitive market environment as they foster a healthy development of the industry.

Second, we remain steadfast in our opposition in evolutionary competition within the sector. Third, we are committed to driving high-quality -- evolution of quality food delivery, high-quality food delivery through continuous innovation in our supply chain model.

Thank you. Next question, please.

Your next question comes from Kenneth Fong with UBS.

[Interpreted] My first question is about the profitability and investment in new business. Under the backdrop of macro uncertainties and yet the accelerated investment in overseas and Jingxi business, how should management balance the growth as well as the profitability? What level of investment should we expect for 2026 for this new business? And how should it affect the group earnings?

And my second question is about the overseas business. Can management share some update on the CECONOMY acquisition progress time line and the impact on financials post consolidation? From the strategic angle, how would Joybuy position? And what kind of benefit or synergy should we expect from the group level, i.e., retail, logistics and the whole supply chain point of view?

[Interpreted] Regarding our thoughts on investment and profitability, from a long-term perspective, we are confident in the prospects of the China market and our own business development. Based on our views of the market opportunities, we have made long-term strategic investments, including in our international business, lower tier markets and on-demand retail.

At the same time, we have been committed to investing in R&D and technologies. By enhancing our foundational capabilities and expanding our service scope, we believe we will continue to unlock new growth opportunities, which will also drive our long-term profitability. JD's high single-digit long-term margin target remains unchanged.

In terms of JD Retail, we expect to see healthy growth of retail's profit in 2026 and our long-term target for JD Retail, which is high single-digit profit margin, also remains unchanged. Key growth drivers of this, including improvement in product sales, gross margin brought by our enhancing supply chain capabilities, robust growth in high-margin business, such as advertising, as well as continued margin improvement in categories, including supermarket.

JD Retail's flow benefit will also continue to play out and its operating efficiency will have further room to improve as we increasingly adopt AI technology.

In terms of our investments in new businesses. For JD Food Delivery, its loss narrowed by nearly 20% quarter-on-quarter in Q4. We continued to maintain its healthy scale expansion while narrowing its loss ratio with improved operating efficiency and revenue growth during the quarter.

Looking at 2026, we will continue to drive healthy scale growth of the food delivery business and further unlock its synergies with core JD Retail. If the industry competition trends towards more rationality, we expect our investment in JD Food Delivery in 2026 to decline from the 2025 level.

For international business, we will gradually increase our investment on a controlled scale. We will maintain financial discipline in the investment.

For Jingxi, it has focused on lower-tier markets and a nonbranded product supply. It has made a meaningful penetration improvement, particularly in Tier 6 and lower cities. This has helped expand our user growth boundaries as it offers differentiated product offerings from our main apps. We expect to increase our investment in Jingxi a little bit, but we believe its UE to continue to improve in 2026, delivering healthy and sustainable business growth.

As to your question about the CECONOMY deal, at the current stage, it is under regulatory review. We will update the market in due course.

Joybuy is our full category online retail platform in Europe. It is scheduled to officially launch in March. Building overseas supply chain capabilities is a long-term initiative that takes time and continued efforts. Based on its trial operations, Joybuy has received a very positive user feedback, especially on the performance side.

Logistics experience will be a key differentiator for Joybuy. We are building our own delivery network in Europe, and the JoyExpress has been launched recently. It provides same and next-day delivery in major cities across the U.K., Germany, France and the Netherlands along with services such as door-to-door delivery. We welcome all analysts and investors to try out our services.

As for synergies, first, on supply chain capabilities, while helping Chinese brands expand globally, we also aim to bring more high-quality European brands into the Chinese market, further strengthening our global supply chain capabilities.

Second, on logistics, as Joybuy expands in Europe, the synergy between retail and the logistics in our overseas business will be further strengthened, reinforcing Joybuy's competitive edge. Third, on the technology front, JD's long-standing expertise and robust infrastructure will continue to empower our international business.

Next question, please, operator.

Your next question comes from Alicia Yap with Citigroup.

[Interpreted] So in light of the potential slower retail sales growth outlook this year, what is the growth rate management have in mind for your general merchandise GMV and revenue growth? How can JD continue to grow faster in this category amid the competitions and also slower consumption? And what are the specific differentiated areas JD is able to drive sales in this segment?

And second question is that can management share your thoughts on how JD might prepare and position to embrace the upcoming threats and opportunity from the agentic commerce?

[Foreign Language]

[Interpreted] Thank you, Alicia. For your first question on the general merchandise category, we shared in the opening remarks that the category is maintaining healthy momentum. So looking back at our track record, the general merchandise category have maintained double-digit growth for the past 5 consecutive quarters and notably outperforming the industry.

This is driven by our evolving supply chain capability and a remarkable improvement in operation efficiency expertise. This lay a solid foundation for continued growth in this category.

So we are -- we remain very confident in the healthy momentum of general merchant category in 2026. The sustained growth driver includes, first, huge market potential with ample room for growth in categories such as supermarket, fashion and health care.

Second, user growth. So new business, including food delivery, Jingxi, have brought growth in traffic, user and shopping frequency on JD platform. So we are also accelerating internal synergy and we have observed healthy cross-selling trends in category like supermarkets.

Third, continuously strengthen supply chain capability and user mind share. So from a category perspective, our supermarket category leverages JD's unique 1P model to deliver an excellent user experience and at the same time, competitive pricing.

Meanwhile, our fashion category has seen notable improvement in building underlying capability, including search and recommendation in 2025 as well as attracting more high-quality brands to deepen their collaboration with us.

We are also applying AI to achieve more precise and personalized matching in search and recommendation. In Q4 '25, we recorded double-digit growth -- year-on-year growth in both sports and outdoor apparel revenues.

In terms of our differentiated advantage in this category, first and foremost, the core moat of JD 1P model is the key. This includes more diverse product selection, more competitive pricing and more rigorous quality control.

Second, leveraging on the core capability of JD Logistics, we offer high-quality fulfillment experience of faster, more accurate and door-to-door delivery service.

Third, from the brand standpoint, JD is the most consistent daily sales platform. JD is the premier destination for brand building and the platform that offers the highest returns throughout our product's entire life cycle. So we provide brands with stable and efficient sales performance.

[Foreign Language]

[Interpreted] For the second question, we see AI and agentic commerce as a greater opportunity for JD evolution than a challenge. First, agenetic commerce is still in early stage and mainly affect the front-end user traffic.

Our view is that no matter how traffic patterns change, the core retail business remains as user experience, cost and efficiency. So as we stay focused on optimizing product price and service, JD supply chain strength will yield even greater synergy, further widening our competitive moat in the agentic era.

At the same time, we are accelerating our technology investment while driving the adoption of our in-house large language model, we remain committed to an open ecosystem, actively collaborating with industry-leading external AI LLM providers.

We are evolving into a leading technology commerce company, spending entire spectrum from supply chain to customers. As JD run a 1P business model with in-house fulfillment logistics service capability, the technology and AI application scenario is abundant. So this really differentiates us from platform business model.

I'll briefly give some examples. On the demand side, we are reshaping the shopping journey and enhancing user experience through AI-driven search and recommendation. On the supply side, we leverage AI to continuously enhance operational efficiency in AI in areas such as sourcing, pricing, inventory management, replacing manual labor.

We are also expanding our application in the physical world in terms of fulfillment, automation and after-sale services. Beyond operation, we are unlocking new consumption potential as well through applying AI, such as JoyInside, our AI agent for hardware.

As I mentioned before, the sales of JoyInside-integrated products surged 20-fold during 11.11 compared to the June 18 promotion. So you can see we are leveraging -- we are very proactively leveraging AI to reshape our competitive advantage and continue to optimize our user experience, at the same time, drive cost efficiency.

Looking ahead, we are very confident and believe we are well positioned to capture the strategic AI opportunity to solidify our leadership in AI-driven e-commerce.

Next question, please?

Your next question comes from Thomas Chong with Jefferies.

[Interpreted] I have 2 questions. First, can management share about the latest developments on shareholders return? And second, can management talk about any changes to the regulatory environment for Internet platform companies and how should we think about it?

[Interpreted] Thank you, Thomas. Despite the long-term strategic investment we made in 2025, we remain committed to shareholder returns through both dividends and share buybacks.

We declared the 2025 annual cash dividend of USD 1 per ADS, stable compared to last year. The total dividend amount is USD 1.4 billion. This underscores our commitment to delivering consistent cash returns to shareholders based on our sustainable profitability and cash flow in the long term.

In addition, we repurchased USD 3 billion worth of shares in 2025, representing 6.3% of total outstanding shares as of the end of 2024. All the repurchased shares have been canceled. We remain firmly committed to shareholder returns through healthy business development, dividends and share buybacks.

At the same time, we will remain focused on the healthy growth of our business scale, profitability and cash flow and make strategic investments for the long term while creating value and sharing JD's long-term success with our shareholders.

[Foreign Language]

[Interpreted] I'll take the last question. Regulators continuously promote the standardized development or the healthy development of the platform economy, ensuring sector's long-term sustainability. So we welcome regulatory guidance. The government's commitment is to support compliance, corporate development rather than -- remain unchanged.

We believe regulatory oversight is not a constraint, but rather a catalyst for driving healthy, high-quality industry growth. So JD has always prioritized compliant operation as the cornerstone of our business. Whether it is antimonopoly measures, tax standardization or preservation of evolutionary competition -- prevention of evolutionary competition, this effort aligns perfectly with JD long-standing philosophy of compliance.

So under a normalized regulatory environment, fair growth opportunity are created as we prevent bad money drives out good. So as a result, over the long term, the advantage of JD compliant and sustainable business model will become increasingly prominent. Thank you.

We are now approaching the end of the conference call. I will turn the call over to JD.com's Sean Zhang for closing remarks.

Thank you for joining us on the call today, and thanks for all your questions. If you have further questions, please contact me and IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, and thank you for standing by for JD.com's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JD.com's Third Quarter 2025 Earnings Conference Call.

With us today are CEO of JD.com, Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts.

Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in earnings press release on our IR website, which applies to this call.

We will discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note all figures mentioned in this call today are in RMB, unless otherwise stated.

Now let me turn the call over to our CEO, Sandy. Sandy, please?

Thank you, Sean. Hello, everyone. Thank you for joining our third quarter 2025 earnings conference call. We achieved a set of solid results across our strategic priorities during the third quarter and further enhanced our capabilities to drive better user experience, lower cost and higher efficiency. Our total revenues were up 15% year-on-year, sustaining our double-digit growth momentum. We are delighted to see growth of our general merchandise categories and marketplace and marketing revenue continue to accelerate sequentially. Both are becoming our important growth drivers.

Non-GAAP net profit came in at RMB 5.8 billion in the quarter with the core retail business margin continued to expand year-on-year. Our food delivery business also sustained healthy expansion while its loss narrowed in Q3 from the prior quarter as we continue to optimize operating efficiencies and improve unit economics.

Overall, our business are making good progress along our long-term strategic road map. We are confident that our core retail business will steadily expand market share with healthy margin improvement and new initiatives will create deeper synergies and drive healthier financial models, further strengthening our entire business ecosystem.

Among all the encouraging developments that underpin these results, I would like to point 3 most notable highlights for this quarter, which I believe should be the key takeaways from today's call. First, strong momentum in our user base and engagement. Our quarterly active customer number was up over 40% year-on-year in Q3, sustaining the momentum built in the previous quarters, thanks to both organic growth of JD Retail as well as contributions from our new businesses such as JD Food Delivery and Jingxi. The consistent growth has led to our annual active customers exceeding 700 million in October, making a new milestone in our user expansion.

In particular, the number of JD Plus members, our highest quality user group also recorded healthy growth in the quarter. In addition to user scale, user shopping frequency on our platform also increased by over 40% year-on-year in Q3, a pace we've sustained for 2 consecutive quarters.

Notably, we saw meaningful shopping frequency increase across all user groups, including new users, existing users and JD Plus members. This user momentum is clear proof that we have stayed very focused on providing a better user experience amid evolving user demand.

In return, our expanding and more active user pool further improves our engagement with users, deepens our user insights and enables us to better address their demand. This virtual cycle ultimately supports our sustainable growth in the long run.

Second, our core retail business remained strong in Q3. Retail revenues increased by 11% year-on-year in the quarter to RMB 251 billion. There were a mix of contributors to this. While the high base effect for electronics and home appliances category started to kick in, sales of general merchandise as well as marketplace and the marketing revenues continue to accelerate growth this quarter.

Profit wise, both JD Retail's gross margin and operating margin further expanded at a solid pace, demonstrating the continued scale benefits and operating efficiency gains of the business.

Looking at the main categories, the electronics and home appliances category has been faced with a high base since the second half of Q3, which has been weighing on its growth momentum. This is an industry-wide challenge and we are working closely with brands and manufacturers to navigate through it. For example, we've been leveraging our market and user insights to support brands and manufacturers in developing new and customized product models. Meanwhile, we continue to lower the cost for brands and strive to secure the best prices for our customers. Thanks to our supply chain capabilities. Although the high base effect is expected to linger the near term, it's clear that the advantages of our business model and market position in these categories remain intact, and we are confident in building on these strengths, to unlock new growth potential in this market.

General merchandise category recorded 19% year-on-year revenue growth in Q3, an impressive acceleration from a quarter ago. Within this category, revenues from supermarket, fashion and health categories maintained double-digit year-on-year growth in the quarter. The strong tailwind is expected to sustain into Q4. This is a result of our efforts in enhancing our product portfolio, price competitiveness and service quality, which eventually translates to better user experience and stronger user main share.

As we continue to tap into the huge market potential, we believe general merchandise will play a bigger role in supporting JD Retail's long-term growth.

In addition to healthier category mix, another bright spot in our Q3 performance was marketplace and marketing revenues which, at the group level, grew 24% year-on-year in the quarter. It has remained on a double-digit growth trajectory for 4 consecutive quarters. In particular, growth of our advertising revenues has accelerated sequentially in every quarter this year and exceeded 20% year-on-year in Q3. This strong momentum mainly stems from the accelerated ad revenues generated by core JD Retail business.

Our improved ecosystem for both 1P business and 3P merchants, fighter AI-powered ad tools and improved traffic allocation efficiency all have contributed to the strong trend. As we move into Q4, we expect marketplace and marketing revenues to continue the healthy growth. Our platform ecosystem is taking good shape and gaining positive traction with suppliers and merchants, large and small.

The third highlight I want to share is our new businesses. Within the segment, JD Food Delivery continued to make healthy progress in Q3. It's GMV achieved double-digit quarter-on-quarter growth in the quarter driven by both order volume growth and a healthier order mix with high-value orders contributing a vast majority of total orders. While scaling up the food delivery business also narrowed operating loss sequentially in Q3, thanks to the improving UE performance. This encouraging progress is achieved through our enriched supplies, increased operating efficiency, disciplined investment made a competitive market and our efforts to expand food delivery revenue streams.

More importantly, food delivery continued to generate strong synergies with our retail business. In addition to user growth and engagement, the cohort cumulative cross-selling rate has been on an upward trend. Products from our supermarket electronic accessories and Jingxi categories remained the biggest beneficiaries of this trend.

Going forward, we will focus on further growing the food delivery business scale, UE optimization and unlocking stronger synergies with retail, logistics and other businesses across our ecosystem. Other new businesses, including both Jingxi and international business are progressing well as planned. Jingxi further penetrated into the lower-tier markets and grew its merchant and user base. Our international retail business is gradually establishing capabilities in the U.K. from Germany and Benelux regions, paving the way for our global expansion, both are making solid steps in executing on their long-term strategies.

One more thing before I wrap up. We unveiled our AI road map during the 2025 JD Discovery Conference in September. I want to share a few exciting updates here. First, we launched a number of new AI products at the event, including TaTaTa, an all-purpose digital human assistant app and JoyInside, an AI agent for robots, toys, devices, among others.

Second, we introduced the industry specific AI applications across 4 sectors of retail, health care, logistics and Industrial.

Third, we also made upgrades to a few of our retail technology infrastructure, such as JD Streamer, our new digital human technology that provides e-commerce live streaming and short video production solutions. JoyStreamer has served over 40,000 brands so far with significantly lower cost and better sales performance compared to real human live streaming costs.

In addition, we provide 24/7 nonstop AI customer service which handled over 4.2 billion inquiries during our 11.11 Grand Promotion. We are excited about the potential of these AI applications as we foster a comprehensive AI ecosystem spanning across various industries.

To conclude, Q3 was a productive quarter with all our business lines moving ahead steadily on our strategic road map. The user momentum on our platform was strong. Our core retail business is in solid shape with multiple complementary long-term growth drivers and great potential for long-term margin improvement. Beyond core retail new businesses, including food delivery, Jingxi and our international retail business are on track for healthy development, both financially and operationally. Taken together, our businesses are operating in synergy, bolstering our conviction in the path ahead, we see great opportunities to further unlock the collaborative value of our business ecosystem and to position us well for sustainable, high-quality growth.

With that, now let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thank you for joining the call today. In the third quarter, we recorded a set of healthy performance across our business lines. Our total revenues were up 15% year-on-year, outpacing the growth of MBS total retail sales. This was supported by double-digit revenue growth in our core retail business.

Despite the high base for electronics and home appliances, general merchandise and service revenues both delivered stronger growth in Q3 and recorded their fastest pace since the second quarter 2023. In terms of profit, JD Retail achieved strong year-on-year expansion in both gross and operating margins in the quarter. And our food delivery business also saw a sequential reduction in investments scale. Overall, our business are moving in the right direction, and we are at a stronger position to drive sustainable growth for the long term.

Now let's go through our financial results in the third quarter. Total net revenues increased by a solid 15% year-on-year to RMB 299 billion in Q3. Breaking down the mix. Product revenues were up 10% year-on-year in Q3. Revenues of electronics and home appliances were up 5% decelerating from last quarter due to the high base effect created by the trading program. This is in line with our expectations and we are confident that -- we are positioned to further solidify our leading market position as we leverage our supply chain advantages and stay focused on enhancing user experience, reducing costs and improving efficiency.

Revenues of general merchandise were up 19% year-on-year in the quarter, a notable highlight of our Q3 performance. Growth in general merchandise has sustained double-digit growth for 4 consecutive quarters and further accelerated from the previous quarter. Within general merchandising, both supermarkets and fashion categories saw growth rate surpassing mid-teens in Q3. The results were mainly driven by our continuous efforts to enhance our operational capabilities, build up better user experience and mind share, alongside our growing market share. This gives us the confidence that the strong momentum in our general merchandise categories will continue going forward as we capture the huge potential in this market.

Service revenues were up 31% year-on-year in Q3, a solid acceleration compared to previous quarters. Notably, marketplace and marketing revenues increased 24% year-on-year, accelerating sequentially every quarter for 7 quarters in a row.

Within this line, advertising revenues continue to see robust growth, mainly driven by the notable improvement of user engagement and better advertising tools that we provide for both suppliers and merchants at our core retail business.

This demonstrates our more robust ecosystem and the strong growth in the number of merchants and users on our platform. We expect marketplace and marketing revenues to continue solid growth in Q4, contributing to both our top line growth and margin performance. Logistics and other service revenues grew 35% year-on-year in Q3, mainly driven by the incremental delivery revenues from food delivery business.

Now let's turn to our segment performance. JD Retail revenues were up 11% year-on-year in Q3. Our core retail business has built multiple growth drivers and we believe growth of the general merchandise category and value-added services, including advertising will be important pillars in retail's long-term growth.

JD Retail also saw healthy progress in margin expansion in the quarter. This gross margin has sustained year-on-year expansion for 14 quarters in a row and was up 1.3 percentage points to 19.3% in Q3. This was driven by a favorable mix shift towards higher-margin business, along with optimized procurement costs by leveraging our scale effect and supply chain advantages.

In addition, in Q3, JD Retail's non-GAAP operating income was up 28% year-on-year to RMB 14.8 billion, and operating margin was up 76 bps to 5.9%, both continuing strong momentum.

Moving to JD Logistics. The logistics revenues were up 24% year-on-year in Q3. Both internal and external revenues grew at a steady pace. And JD Logistics also saw incremental delivery service revenues generated by food delivery business.

In terms of profit, JD Logistics non-GAAP operating income was compressed 39% year-on-year to RMB 1.3 billion in the quarter as it continued to invest in customer experience, service capabilities and technology to enhance the efficiency of the entire logistics process. These efforts aim to boost JD Logistics competitiveness in products and services and strengthen its market position, which over time, will translate into sustainable margin expansion.

Our net new business generated RMB 15.6 billion in revenues, a steady growth compared to last quarter. This was driven by the continued expansion of our food delivery, Jingxy an international business. Non-GAAP operating loss of new business slightly widened sequentially to RMB 15.7 billion. To break this down, food delivery saw a sequential reduction in its investment in Q3. Our food delivery business continues to scale with a healthier financial model with expanded revenue streams, disciplined spending in users and increased operating efficiency.

As to other new business, both Jingxy and international business increased investments compared to a quarter ago. They're in a rapid development stage and are important pillars in JD's long-term strategies. Going forward, we will continue to scale up the new business and further unlock synergies to set the stage for our future growth. At the same time, we are committed to improving UE performance and aim to drive healthy and sustainable bottom line growth in the long run.

For our consolidated profit performance in Q3, our gross profit was up 12% year-on-year to RMB 50 billion. And gross margin was 17%, slightly reduced by 0.4 percentage points. This was primarily due to margin dilution from the food delivery business and JD Logistics, which offset JD Retail's solid gross margin expansion in the quarter.

Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 5.8 billion in Q3, and non-GAAP net margin was 1.9%, both down year-on-year. This near-term headwinds in profit mainly reflect our investments in food delivery. Our last 12 months free cash flow as of the end of Q3 was RMB 13 billion compared to RMB 34 billion in the same period last year. This was primarily due to cash outflows associated with the trading program. and the decline in operating income. By the end of the third quarter, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 211 billion.

In summary, we're encouraged by the solid progress in both core retail and new business. Retail has built a growth metric with multiple drivers and a clear path to our long-term margin target. Food delivery is growing with a healthier financial model and other new business, including lower tier market and international business are also making solid steps to the next chapter. All our businesses are on the right track, starting to generate notable synergies with 1 another and collectively contributing to our high-quality development in the long term.

With that, I will turn it back to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, you're welcome to ask questions in English or Chinese, and our management will answer the question in Chinese, will provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in the original language. Operator, we'll open the call for a Q&A session now.

[Operator Instructions] Your first question comes from Kenneth Fong.

[Foreign Language]

[Interpreted] My first question is on the government trading subsidies. As the year-on-year comparison base is getting higher into the second -- into the fourth quarter, can management share the growth outlook for the electronics and home appliances grow for JD Retail?

And financially, as the trading subsidies fade and volume kind of slower in terms of growth year-on-year. How should we think about the margin impact on JD Retail. My second question is on the overseas development. Post the recent acquisition on some company overseas and JD Joy by commenced operation. Can management share about this overseas strategy, including the scale and the pace of investment?

[Foreign Language]

[Interpreted] Thanks for your question, Kenny. Yes, since last year, the training program has stimulated consumer demand and contributed to the sales of home appliance and PCs, so this created an inevitable high base for the industry, which is within the market expectation. Although the trading program has caused short-term fluctuation in the consumer demand, its more substantial impact is driving industry upgrade and promoting products that are innovative, intelligent and green and ultimately, leading to high-quality growth of the industry.

[Foreign Language]

[Interpreted] Since the treating program, JD has actively supported the implementation of the policy. As such, we have further enhanced our market share and supply chain capability in the related categories and especially on our 1P model, the continuous enhancement of our core advantage differentiate JD and build our long-term growth foundation we'll continue to leverage our strength in product price and service with the goal to further strengthen user mind share and consolidate and expand our market share will focus on a few areas.

[Foreign Language]

[Interpreted] So this area includes, first, on the product innovation, we'll collaborate with brands to launch more customized products, driving product upgrades and innovation on price optimization will also leverage our scale advantage and supply chain capability to further optimize cost, offering user more competitive price.

And on the service, so we're offering omnichannel consumer service will build a seamless online and offline shopping experience for our customer. For example, we have been strengthening our off-line presence in home appliance and 3C categories, focusing on large stores like JD Mall, JD Home appliance, city flagship stores in the high-tier cities, and smaller ones such as JD Home appliance stores in the low-tier market. In addition, we also provide differentiated service, including integrated delivery and installation, offering better user experience and more efficient service to our users. With these efforts will further consolidate our market share. As of Q3, we have built -- we have over 20 JD Malls nationwide and the number of JD Appliance City flagship stores exceeded 100.

[Foreign Language]

[Interpreted] In terms of profit margin, we'll continue to offer users the best value for money product to ensure better user experience and mind share. Additionally, whether during the training program or in a normalized phase going forward, our team will leverage supply chain capabilities and enhance collaboration with brands.

[Foreign Language]

[Interpreted] So overall, we are confident in our user mind share and market share in the home appliance and 3C categories, JD will continue to strengthen our capabilities and strategic positioning, working very closely with brands to address short-term challenges and support the long-term healthy development of the industry.

Additionally, our growth drivers are now more diversified. We have seen sustained sales growth acceleration in categories such as supermarket, health, fashion and service revenue from advertising, which are emerging as new growth engines for JD. Furthermore, as I just have shared both our user base and shopping frequency have been on a stronger growth trend during JD 11.11 Grand promotion, the number of our shopping customer increased by 40% year-on-year. This set of momentum will support our healthy growth next year and give us more confidence in the long term.

[Foreign Language]

[Interpreted] Regarding your second question on JD's international business. So first, from the strategic perspective, international expansion has always been a key long-term strategy for JD, as the largest retailer in China, we aim to gradually establish a highly efficient global retail network so that we can deliver JD's premium shopping experience to consumers worldwide.

We recognize the international market is very big, for example, Europe is the second largest consumer electronics market in the world, only second to China, and there are still many great areas to improve user experience. We also aim to seize the opportunity of Chinese supply chain going global, leveraging our supply chain advantage to better support Chinese brands in their international expansion.

In terms of business model, unlike other cross-border e-commerce platforms, we leverage our supply chain capabilities, commit to a local e-commerce approach and localization strategy. We collaborate with high-quality brands and suppliers around the world to create mutually beneficial partnership.

[Foreign Language]

[Interpreted] In terms of progress, currently Joybuy our European online retail business is in the test phase in countries, including the U.K., France, Germany and the Netherlands. This marks an important step in JD's international strategy will continue to enhance user experience and build in key -- build our key capabilities in areas including first expanding product offerings and collaboration with premium global brands; second, enhancing logistics capability to improve the efficiency and stability of warehousing and delivery third, investing in R&D to optimize the product functionality and enhancing shopping experience.

We welcome investor analysts based in Europe to experience our Joybuy app and provide us your experience. Regarding CECONOMY, the transaction is still subject to the regulatory approval will provide you guys further updates when appropriate.

[Foreign Language]

[Interpreted] So from the investment standpoint, this is a gradual process. We will continue to advance our international expansion strategy steadily while maintain a gradual and prudent financial discipline. We will prioritize investment efficiency and make dynamic adjustments to adhere healthy and sustainable -- to achieve healthy and sustainable growth. Overall, the scale of the investment in our international business will not be substantial for JD.com and will carefully manage the investment pace and scale. Operator, we can take the next question.

Your next question comes from Ronald Keung with Goldman Sachs.

[Foreign Language]

[Interpreted] The first is on food delivery. What is the duration that the JD will be committed to invest at this loss-making period as part of customer acquisition? And what's the progress in improving economics and commissions and business models like the 7Fresh and even coffee across the 7Fresh brands?

Second question is on general merchandise, seeing very healthy growth there in 3P. So how do we plan to further strengthen the competitive edge in the 3P categories, supermarket, health and apparel in terms of speed, selection, quality and price?

[Foreign Language]

[Interpreted] Thank you, Ronald, for your question. Both food delivery and on-demand retail is a long-term strategy for JD. We aim to drive healthy and sustainable growth of the business. We have been optimizing operational efficiency and improving UE. So in Q3, we remain very rational amid the intensified competition in the industry our food delivery business is currently in its first stage of development.

Our goal for this stage is to establish better user mind share and market share in the quality food delivery sector. We will be committed to providing high-quality food delivery service to our existing premium user while attracting new users. Additionally, as you guys know, we'll be good at is supply chain. So we'll continue to deepen our supply chain effort such as through our innovative 7Fresh teaching model to offer differentiated experience and service to our users.

[Foreign Language]

[Interpreted] So in the third quarter, JD Food Delivery maintained healthy growth trend. JD Food Delivery GMV achieved double-digit growth quarter-on-quarter. Alongside order volume growth, we also delivered a healthier order mix with a proportion of mill or mail orders steadily rising and contributing `to a bus majority of our total order.

At the same time, average price per order also increased quarter-on-quarter compared to Q2 meet intensified competition. So this is remarkable. While scaling up overall investment in food delivery in JD Food Delivery business in Q3, narrowed sequentially thanks to the UE improvement, the revenue contribution of food delivery is still limited as we are implementing a commission-free policy for merchants and only started to generate limited advertising revenues.

That said, our team has made solid progress in improving operational efficiency, including enriching supplies the number of high-quality restaurant merchants continue to grow in the quarter. And we also further improved our subsidy efficiency with refined operations and tailored subsidy strategy to different regions, user groups and order types. In addition, as we continue to upgrade our underlying system capability we have seen better operating efficiency. We also launched our new business, 7Fresh Kitchen model in July, which address full safety concerns through supply chain innovation. Our goal is to ensure that consumers can enjoy their meals with peace of mind and at the same time, help quality restaurant improve profitability.

Since its launch, 7Fresh Kitchen has been welcomed by our customers with a rapid increase in its order volume. It has also boosted sales and order growth of other quality restaurants within the 3-kilometer range. By the end of this year, people will see more semi-fresh kitchen in the region of Beijing.

[Foreign Language]

[Interpreted] Looking ahead, we'll drive our strategic progress with a long-term perspective and focus on long-term ROI. Our goal is to create a sustainable business that drives healthy order growth and at the same time, gradually and long scale effect and enhance operations with better UE.

Ultimately, JD food delivery should be a self-sustaining business. Moreover, food delivery is deeply integrated into JD overall ecosystem. We believe there is significant potential for synergies in user momentum, supply and fulfillment within our ecosystem. The way of our business working together is not simply adding 1 and cutting another. JD user acquisition costs -- in the long term JD-user acquisition cost will decrease. And at the group level, we are committed to driving sustainable growth while maintaining profitable and cash flow sufficient.

[Foreign Language]

[Interpreted] Regarding your question about our general merchandise category, as I mentioned before, it has sustained a 4 quarter consecutive double-digit growth key categories, especially supermarket, health, fashion and home goods all delivered very strong growth. We see significant growth potential in general merchandise, including supermarket and fashion as our users have substantial unmet demand, we have clear growth strategy for each of these key categories.

First, on supermarket categories, we focus on improving user mind share and user penetration through promotions such as -- through our promotions such as Black Friday and Super 18 will build stronger user mind share of our supermarket offering. Supermarket category will also take the opportunity of our rapid user growth on the platform to drive healthy -- higher penetration and conversion.

We have been optimizing costs and improving operational efficiencies through our supply chain capability, providing more competitive price to our user which validates the economic scale of our 1P model. Our supermarket category has made solid progress in this area and build strong competitive -- competitiveness compared to other models online and offline. At the same time, we will collaborate with brands further refine our operations and build categories with strong JD mind share and growth potential such as liquor, baby and mom products and household cleaning categories or all have already established strong user mind share, we expect to make breakthroughs in other categories as well.

[Foreign Language]

[Interpreted] Overall, our strategy for the general merchandise category is very clear. We are confident in the growth potential and market opportunity in the general merchandise sector as we enhance operation and user mind share. General merchandise is an important pillar of JD growth metrics and will support our long-term sustainable growth. We can take the next question, operator?

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language]

[Interpreted] So can management share with us the synergies on general merchandise category that benefit from the food delivery traffic, most of your food delivery users come from loyal JD user -- and what is the retention rate of the newly acquired user through the food delivery? Would you be able to quantify and share the cohort of new food delivery users who become active user of JD Core retail user. And second question is can management update us on your latest AI strategy and investment. Can you elaborate how AI has helped on JD's Core business? And how do we think about the financial impact?

[Foreign Language]

[Interpreted] Thank you, Alicia, for your questions. I will take the first one. So as JD Food Delivery drives healthy development, we also see it's generating deeper synergies with JD Retail. First, on the user growth and user engagement side. In Q3, DAU of JD app maintained a rapid growth with growth rates leading the industry.

Our quarterly active customers and user shopping frequency, both recorded over 40% year-on-year growth in the quarter. As we continue to provide quality food delivery, we have seen JD food deliveries user retention rate maintained at a relatively high level and at the same time, boost our overall user engagement and user shopping frequency, while serving our high-quality existing users, our food delivery business also attracts new users to our platform.

Our annual active customer number surpassed the milestone of 700 million in October, reflecting our expanding user base and increasing user stickiness. At the same time, we will be accelerating the deployment and further optimizing our user conversion strategies and tools based on the preferences of food delivery users -- we have been providing retail product selection and recommendation in a more precise way, thus driving better user conversion. We have seen that the conversion rate of the new users acquired by JD Food Delivery has been trending up month by month. And for the earliest group of such users, their cohort conversion has reached close to 50% in Q3.

[Foreign Language]

[Interpreted] Second, on the cross-sell side, we will see a stronger trend of cross-category purchases of food delivery users, particularly of our general merchandise category including supermarket products and live services. We believe food delivery will create new growth momentum to our general merchandise category as it attracts new users and drives up shopping frequency of our existing users.

In addition, 3D food delivery has also accelerated the development of our on-demand retail business. We will build a dedicated team that pays close attention to this area. Going forward, we will continue to accelerate the synergies between food delivery and core retail business, in terms of user momentum, cross-category purchases and marketing. In addition, we will tap into more synergies of our broader business ecosystem driving healthy progress in our user base expansion, revenue growth and efficiency improvement.

[Foreign Language]

[Interpreted] I'll answer the second question. So we are in the new era where we see a lot of new opportunities in AI and significant value of business model reform. JD has built a solid comprehensive AI capability framework that covers infrastructure models, platforms, application scenarios and products.

Over the next 3 years, we will make a sustained investment to foster a trading RMB scale AI ecosystem across various industries. So at our JDB conference, in September, we have unveiled JD AI strategy road map and launch flagship AI product, including our JD AI TaTaTa and all-purpose digital human assistance and JoyInside an AI agents for robot toys, devices and among others.

[Foreign Language]

[Interpreted] In terms of application, JD's differentiation is that we have extensive application scenarios, including retail, logistics, health care and industry -- other industry sectors -- so taking both retail and logistics, as example, in retail use case, we are providing merchants with over 50 AI tools, such as AI systems, AI agent for advertising allocation and [indiscernible] MDM to help them -- help merchants enhance efficiency and lower cost in content generation marketing, supply chain management and customer service.

We also redefined e-commerce experience in the AI era. We launched a smart search and recommendation function through natural language interaction, it can precisely understand user needs and delivering a huge breakthrough in shopping efficiency and truly personalized shopping experience.

In the logistics use case, while our logistic robots have been deployed across more than 20 provinces in China and over 10 countries globally, covering the entire logistics chain from warehousing, sorting to transportation and distribution.

Looking ahead, the expanding deployment of logistic robots autonomous vehicles and drones will further reduce logistic costs in the society, increase our business partner efficiency and keep optimizing shopping experience for our consumers. Okay, operator, we can take the last question.

Your last question comes from Thomas Chong at Jefferies.

[Foreign Language]

[Interpreted] My first question is about our ecosystem development, including the number of 3P merchants contribution as well as the expectation over the next few quarters. And my second question is about the outlook in terms of our profitability and margin in the next few years.

[Foreign Language] My first question is above our ecosystem development

[Interpreted] Thank you, Thomas. We've actually made solid progress in developing our platform ecosystem with a set of indicators growing at a very rapid pace. So in Q3, our active merchant number grew by over 200% year-on-year.

We have onboarded more top-tier merchants as well as merchants from industrial belts, providing users further enriched product offering. Meanwhile, our food delivery business has also brought in a large number of quality restaurants to merchants. We have also seen positive feedback from users. In Q3, the number of users who shopped our 3P offerings grew at a fast pace of over 50% year-on-year, outpacing the growth of our total users reflected in the financial results our commission and advertising revenues have been on a very rapid growth trajectory with growth rates accelerating to 24% year-on-year in Q3, which is the highest pace since Q2 2022.

[Foreign Language]

[Interpreted] We believe our platform ecosystem has a lot of potential. In particular, we will further explore industrial belts to onboard more merchants -- we will also continue to expand our full delivery merchant base to enrich local supplies for our 3P ecosystem.

In addition, we will continue to strengthen our platform infrastructure and provide more tech tools to merchants with the goal to help them enhance operating efficiency on our platform. We will also optimize merchant operation rules and traffic allocation efficiency to create a clear growth path and a fair ecosystem for our 3P merchants.

In addition to that, we will continue to strengthen user mind share of our 3P offerings. We will see that for our 3P driven categories such as fashion category, users have built growing mind share of shopping for clothing on JD.com. We are committed to developing our platform ecosystem, achieving win-win outcomes with our 3P merchants and better serving our users. Platform Ecosystem business will also be our long-term driver for both revenue growth and profitability expansion.

[Foreign Language]

[Interpreted] For your second question, in Q3, JD Retail continued to see steady profit growth. This further validates our confidence in retail's long-term margin trajectory. The main drivers for this include: first, the healthy development of our platform ecosystem will drive growth momentum in our commission and advertising revenues, which will be a contributor to our margin expansion.

Second, as we continue to build up our supply chain advantages and the scale effect of our core retail business, we are confident to further lower cost and improve our operating efficiency, which will lead to better margin performance. To note, JD Retail's gross margin has been expanding year-on-year for 14 consecutive quarters. Third, our category mix shift will also impact our margin performance. Currently, the operating efficiency and margin performance of most of our categories and brands have been improving.

In particular, our supermarket category has built stronger procurement capabilities and differentiated product offerings. We see meaningful potential to further increase supermarkets margins going forward.

Meanwhile, as we continue to optimize the product mix for electronics and home appliances, we also see room to increase these categories margins in the long term. In terms of investments in our new businesses, we will be centered around supply chain capabilities to make investments such as in food delivery, international and Jingxi businesses. As we further enhance our supply, performance and services and broadened coverage in categories, customers and regions, we see more growth potential of our businesses.

As the new initiatives generate deeper synergies with our existing businesses, we expect to see improvements in operating efficiency and profitability of our broader business ecosystem. Finally, our high single-digit margin target for the long term remains unchanged.

We are now approaching the end of the conference call. I will turn the call over to JD.com's Sean Zhang for closing remarks.

Thank you for joining us on the call today, and thanks for your questions. If you have further questions, please do not hesitate to contact me and the IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you. Have a good day.

Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, and thank you for standing by for JD.com's Second Quarter and Interim 2025 Earnings Conference Call.

[Operator Instructions]. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director of Investor Relations. Please go ahead.

Thank you, operator. Good day, everyone. Welcome to JD.com's Second Quarter and Interim 2025 Earnings Conference Call.

With us today are CEO of JD.com, Ms. Sandy Xu; and our CFO, Ms. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. After that, we'll open the call to questions from analysts.

Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today's only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on IR website, which applies to this call.

We will discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note, all figures mentioned today in this call are in RMB, unless otherwise stated.

With that, let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our second quarter 2025 earnings conference call.

In the second quarter, we stayed focused on providing the best user experience, lowering costs and improving efficiency to drive healthy, sustainable growth. At the same time, we took some early exciting steps to further advance our long-term development.

Looking at the overall performance we are pleased to report a solid top line growth of 22% year-on-year in the second quarter, with total revenues reaching RMB 357 billion in the quarter. This strong momentum was driven by encouraging acceleration across most of our business lines, including electronics and home appliances, general merchandise categories as well as service revenues.

Our non-GAAP net income attributable to ordinary shareholders in the quarter was RMB 7.4 billion compared to RMB 14.5 billion in the same period last year as a result of the investment and rapid growth in our new businesses including our food delivery business. That said, our core business, JD Retail, continued to see healthy profitability improvement. JD Retail's non-GAAP operating profit increased by 38% year-on-year to RMB 13.9 billion in the second quarter, with an operating margin of 4.5% up from 3.9% in the same period last year.

Overall, we are confident in our core retail business. While our new businesses, including JD Food Delivery, are progressing well as planned, aligning seamlessly with our strategic road map to drive long-term sustainable growth. Behind these results, I'm particularly encouraged by the high morale and collaborative spirit across all the business teams at JD. Their collective efforts forms a solid foundation that will continue to propel our upward momentum and the effective execution of our strategic goals.

I want to highlight 3 key progress we achieved that underpinned our strong performance in the quarter and will sustain our healthy growth going forward. First, user growth and engagement stands out as a key achievement for us in Q2. As we continue to center on users and spare no effort in delivering the best possible user experience. Growth of our quarterly active customers, or the QAC, accelerated notably to over 40% year-on-year in Q2 and total QAC base reached a new milestone.

The strong user momentum in the quarter was driven by both the accelerated growth of JD Retail's organic user base as well as incremental contributions from JD Food Delivery and Jingxi business. In addition to user growth, we also see stronger user engagement. In particular, user shopping frequency on JD's platform rose by over 40% year-on-year in the second quarter, a notable improvement from previous quarters. For JD Plus members, their shopping frequency grew by an even faster pace of over 50% year-on-year in Q2.

This is clear proof that our food delivery offerings resonates strongly with our highest quality user group. We also achieved record-breaking results on the user front during the June 18 brand promotion this year. With the total number of purchasing users more than doubled year-on-year and total order volume surpassed 2.2 billion orders. The positive momentum in user growth and shopping behavior stands as a powerful testament to the synergies between our new business initiatives and core retail business. We will continue to deepen the synergies and unlock the greater value, which we expect will strengthen overall user stickiness to our platform and drive higher lifetime value across the JD ecosystem.

Secondly, our core business, JD Retail, continued to gain steady traction on the back of our further strengthened supply chain capabilities. In Q2, JD Retail achieved robust momentum on both top and bottom line. By category, electronics and home appliances maintained a strong momentum in the quarter with revenues up 23% year-on-year.

This reflects our ever-evolving supply chain strength, which enables us to further enhance procurement capabilities and offer users extensive product selections, competitive price and superior services. These strengths have positioned us as a leader in the industry, both during periods of trade-in programs and throughout the day-to-day development.

Our general merchandise business also delivered strong performance in the second quarter, with revenues up 16% year-on-year, in particular, driven by our supply chain strength. Our supermarket category further extended its streak of double-digit revenue growth to 6 consecutive quarters. Meanwhile, our fashion business continued to maintain double-digit year-on-year growth in revenues in Q2.

The strong top line growth of JD Retail was coupled with an even stronger operating profit growth and margin expansion in the quarter, progressing well towards its long-term target. The continued improvement in JD Retail's profitability is primarily driven by our stronger supply chain capabilities, which ultimately translates to better user experience, lower cost and greater operating efficiency.

Thirdly, we are also encouraged by the healthy development of our new business initiatives. JD Food Delivery business has experienced the rapid growth since its launch, with daily order volume increasingly exponentially in Q2 and several key milestones successfully achieved. We've made significant progress in onboarding high-quality merchants and the number of full-time delivery drivers has increased rapidly. More importantly, JD Food Delivery has started to generate clear synergies with our core retail business. Beyond the user-related insights, I just shared, we are also proactively capitalizing on the cross-selling opportunities brought by food delivery business.

We are pleased to see the progress so far, particularly the increasing cross-sell ratio of new users brought in by food delivery. Supermarket categories, lifestyle services and electronic accessories have benefited the most from this trend. Additionally, as our food delivery business scales, we believe it will further enrich our local supply of merchants and drive user traffic and engagement to all of our 3P merchants, helping establish a more dynamic and comprehensive 3P ecosystem on our platform.

For JD, the current priority for our food delivery business is to enhance core system capabilities from optimizing order dispatching algorithms to refining [ huge ] planning technologies, all to strengthen JD Food Delivery's ability to better serve users and drive traffic and the user growth to merchants on our platform. Driven by these efforts, we are encouraged to see that despite industry dynamics, JD Food Delivery has maintained a healthy order volume growth, especially from new orders in Q3 quarter-to-date.

I want to reiterate that we do not view our food delivery as a stand-alone business as it's deeply integrated with JD's broader ecosystem. We aim to further unlock synergies not only between JD Food Delivery and JD Retail, but also with JD Logistics and other businesses across our ecosystem. This is where our strategic focus lies. Going forward, we will stay focused on our strategic priorities and invest with high efficiency at appropriate pace, amidst the evolving dynamics in the food delivery market.

In addition to our robust operations and rising market position in the domestic market, we've also been proactively looking at opportunities to grow globally and taking some early exciting steps. Going global is a long-term vision and holds strategic value for JD, as we aim to leverage JD's unique advantages of supply chain know-how and technology. In recent years, JD Retail, JD Logistics and JD Property, all have taken steps to test and build out overseas retail formats, warehouse networks, transportation infrastructure and local operational capabilities, especially in Europe and the Middle East. We will share more color of our international development as we progress.

To conclude, Q2 was a very productive quarter. We delivered both short-term results and strengthened our long-term strategic positioning. Our core retail business achieved accelerated top line growth alongside solid profit expansion, underscoring the resilience of our supply chain-based retail business model. Q2 also marked an important milestone in our long-term development, as some of the key initiatives, both domestically and globally, steadily moved forward and started to show early tangible results.

None of this happened overnight. These are the results of years of dedicated efforts to strengthen our core supply chain capabilities, combined with extensive preparation to support our strategic expansion. We always have a clear vision, everything we do is centered on supply chain with our commitment to putting users first and elevating user experience. This will continue to drive every step of our long-term development and value creation for our users, business partners and shareholders today and tomorrow in China and across the globe.

With that, now let me turn the call over to our CFO, Ian.

Thank you, Sandy, and hello, everyone. In Q2, we delivered strong top line growth and robust margin improvement in core retail business. Our total revenue growth for the second quarter was 22%, further accelerating from last quarter and significantly outpacing the growth of China's total retail sales. We saw double-digit growth across our major business lines, including electronics and home appliances, general merchandise and service revenues, all showing a solid momentum compared to previous quarters.

Regarding profitability, our gross margin reached 15.9% in Q2, marking the 13th consecutive quarter of gross margin expansion on a year-on-year basis, primarily driven by our core retail business. Our non-GAAP net profit margin was down to 2.1%, mainly due to our investments in food delivery. Although near-term profitability is impacted by strategic investments, we remain confident that those efforts will position the company for sustained growth and long-term value creation.

Now let's go through our financial results in Q2. Our top line growth maintained a strong momentum in the quarter. Total net revenues increased by 22% year-on-year to RMB 357 billion in Q2. Breaking down the mix. Product revenues were up 21%, with electronics and home appliances revenue up 23% year-on-year and general merchandise revenues increasing by 16% year-on-year in the second quarter, both showing further acceleration compared to previous quarters.

For electronics and home appliances, with government's ongoing stimulus policy and the revitalization of domestic consumption, JD is well positioned to fulfill the demands of consumers and provide best-in-class user experience. As JD has cost competitive advantages in those categories, including strong user mindshare, robust product supply capabilities as well as superior execution capabilities to effectively support local government's trading programs.

For general merchandise, major categories such as supermarkets, fashion, home goods and health, all achieved double-digit revenue growth in Q2. We continue to see substantial untapped potential in our supermarket categories, and we are confident in our ability to provide greater user experience with the best combination of product, price and service in this category while maintaining healthy growth momentum.

Service revenues saw a significant acceleration, rising 29% year-on-year in the second quarter. Notably, the growth rate of marketplace and marketing revenues was 22%, which has accelerated for 6 consecutive quarters. Both commission and advertising revenues maintained double-digit growth momentum in the second quarter. Key operating metrics of our platform ecosystem also showed meaningful progress in terms of both merchant base and user engagement. Logistics and other service revenues were up 34%. The growth rate of Logistics and other service marked an 8 quarter high in Q2, primarily driven by our expanding food delivery business, which generated additional delivery revenue.

Now let's turn to our segment performance. JD Retail revenues were up 21% year-on-year in Q2, driven by solid performance across many of our key categories. In addition, JD Retail continued to achieve year-on-year gross margin expansion, a trend sustained for 13 consecutive quarters. It also marks the highest level for any comparable quarter since inception. This strong track record has been primarily driven by the continued improvement of our supply chain capabilities.

In terms of operating income, in the second quarter, JD Retail's non-GAAP operating income was up 38% year-on-year to RMB 13.9 billion. And operating margin was up 56 bps to 4.5%, maintaining a steady upward trend. We remain confident to further consolidate our market-leading position and drive steady profit improvement moving forward.

Moving to JD Logistics. JD Logistics revenues were up 17% year-on-year for Q2, with both internal and external revenues sustaining double-digit growth momentum. As JD Logistics continue to invest in user experience, its non-GAAP operating income in the quarter declined by 10.3% to RMB 2 billion. That said, JD Logistics is prioritizing capacity building initiatives in last mile pickup and delivery as well as growth optimization. These targeted investments are expected to lay the foundation for efficiency gains and margin expansion in the long term.

Turning to New Business. In Q2, New Business revenues tripled year-on-year. At the same time, its non-GAAP operating loss widened to RMB 14.8 billion, primarily driven by the rapid expansion of food delivery and Jingxi business. Despite near-term financial impact, the food delivery business has driven meaningful traffic and user growth and significantly boost user shopping frequency. We have also observed a visible uplift in conversion and cross-selling with our core retail business.

Moving forward, we will continue to focus on merchant supply, delivery efficiency and user experience for food delivery business. Additionally, our Jingxi business also saw significant growth in the second quarter, as we further penetrated into lower-tier markets with expanded offerings of value-for-money products. For our consolidated profit performance in the second quarter, our gross profit was up 23% year-on-year to RMB 56.6 billion. We have delivered 13 straight quarters of gross margin expansion year-on-year, reaching 15.9% in the second quarter. It was primarily driven by JD Retail's gross margin improvement highlighting the high-quality development of our core business.

Non-GAAP net income attributable to ordinary shareholders was RMB 7.4 billion in Q2, down 49% year-on-year and non-GAAP net margin declined to 2.1%. This near-term margin headwind mainly reflects our strategic investment in food delivery. Our last 12 months free cash flow as of the end of the second quarter was RMB 10 billion compared to RMB 56 billion in the same period last year. This was primarily due to cash outflows associated with the trading program and the decline in operating income. By the end of Q2, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 223 billion.

In summary, our second quarter performance was highlighted by robust top line growth and healthy margin expansion of our core retail segment, reflecting our strong execution capabilities and improving operational efficiency in a dynamic market environment. Looking ahead, we are excited about our new business initiatives and expect it will further accelerate growth in users and shopping frequency, while creating great potential for generating synergies. With the continued momentum in our core business and well-executed new initiatives, we are confident in our long-term healthy growth.

With that, I will turn it back to Sean. Thank you.

Thank you, Ian. For the Q&A session, you're welcome to ask questions in Chinese or English and your -- and our management will answer your questions in the language you ask. We'll provide English translation for convenience purpose only. In the case of any discrepancy, please refer to the management statement in the original language. Operator, we can open the call for a Q&A session.

[Operator Instructions]. Your first question today comes from Ronald Keung with Goldman Sachs.

[Interpreted] First is on trade-in program that we've seen some temporary suspension of trade-in program during June 18 and given some uncertainty about the magnitude or kind of extension of the program next year and some increased competition with other platforms as well, I just want to hear what is our electronics and appliance strategy for the second half given the very strong first half growth and next year's strategy of growth and market share targets?

And second is on food delivery. This is intense competition of 3 players or more. Always these contests -- there's a contest between kind of persistence, execution and differentiation. So how should we think about JD's long-term commitment on this and particularly competing with, number one, which has the larger scale; and number two, with very deep pockets. Being a third player at this point could mean some foreseeable loss for foreseeable period, so how do we assess the customer acquisition, cross-sell and the eventual path to improve unit economics?

[Foreign Language].

[Interpreted] Thank you for your question, Ronald. For your first question, during the implementation period of the trade-in program, JD has demonstrated a consistently solid performance and responsiveness. During this period -- during the trade-in program period, the program itself has made significant progress in boosting consumption and driving industry upgrade this year.

The government has also reiterated that the trade-in subsidy will be continued and with central funding being distributed in batches. During this period, JD has consistently taken a proactive approach to the national policies actively supporting the trade-in program and contributing to the effective implementation. Our capabilities that enable to achieve this include, number one, our robust supply chain capability, which ensure a stable supplies of products along with reliable fulfillment and delivery services. Number two, our system and offline operational capabilities which enable us to quickly coordinate with the local government and facilitate the rapid implementation of the trade-in initiative across regions.

Meanwhile, we have observed robust consumer demand on JD platform. In Q2, the revenue growth of our electronic home appliance categories surpassed 20% year-on-year.

[Foreign Language].

[Interpreted] Secondly, I want to highlight that the trade-in policy itself is an opportunity, not a competitive advantage of JD, but we have a clear strategy to strengthen our market share. We focus on product, price and service and leverage our supply chain capabilities, scale and omnichannel expertise. We have sustained market share expansion throughout Q2 and Q3 to date.

First, in terms of product structure optimization, leveraging the national subsidy JD partners up with brands to accelerate product development, innovation to launch new products such as smart home appliances and customized products. These efforts have helped better satisfy users demand and quality replacement and advances industry upgrade.

In terms of price advantage, we continue to expand our price advantage by leveraging our expertise in bulk purchasing, product customization and we always strive to reduce procurement cost and lower the price for our users. In terms of service capability enhancement we continue to advance our integrated delivery and installation services, offering the industry's best trade-in experience.

[Foreign Language].

[Interpreted] So lastly, in the long-term, JD will leverage its supply chain advantages in electronics and home appliances to actively drive industry upgrade and strengthen our user mindshare. We are confident in sustaining growth up that is outpacing the industry, thereby solidifying and expanding our market share.

[Foreign Language]

[Interpreted] On your second question regarding food delivery, which is a heated topic that attracts a lot of attention lately, and we have shared recently some of our thoughts. Here, I just want to highlight -- share some of the highlights. So again, food delivery and on-demand retail is a key long-term strategic direction for JD with our commitment to improve on user experience, cost and efficiency. We continue to establish and enhance the operational and system capability related to the on-demand retail business and optimize user experience.

As I shared before, we have identified unmet needs across the industry among merchants, riders and users, and we are effectively addressing these needs through our quality food delivery model.

[Foreign Language].

[Interpreted] Looking at some of the specific progress we made in Q2 on the rider side, at the end of Q2, the number of full-time food delivery riders on JD have exceeded 150,000. JD full-time employment system ensures that rider can work with dignity and security, which in turn also enhances our delivery experience. Both our order punctuality and service quality are steadily improving.

On the supply side, we focus on quality food delivery, which is an important differentiation of JD Food Delivery. We onboarded over 1.5 million high-quality restaurant in the second quarter. Moreover, the proportion of orders from meals continue to rise. And we are helping quality restaurant achieve higher sales. We are also constantly innovating at a source of supply chain, launching a new innovative business model called 7Fresh Kitchen model to help consumers enjoy quality and affordable meals.

In terms of system capabilities, our food delivery R&D and operation teams are rapidly iterating to enhance system functionality, including order dispatching efficiency, algorithm improvement, subsidy efficiency and the advertising system to improve -- to provide a better experience for user, merchants and riders.

[Foreign Language]

[Interpreted] Okay. In terms of synergy, I want to emphasize that JD Food Delivery is deeply integrated into JD overall ecosystem. After more than a quarter of operation, JD Food Delivery start to generate synergies value -- synergistic value with our core business. This is within our initial expectation.

First, JD Food Delivery is driving notable traffic and user growth in Q2. DAU of JD App and QAC as well as user engagement all have improved significantly with -- as well as shopping frequency. The conversion rate of food delivery user purchasing B2C e-commerce product is steadily increasing. These include new food delivery user cross-buying e-commerce products and the improvement in shopping frequency among existing users. So we have observed strong cross-selling that is taking place. We aim to enhance the synergy as we develop several capacity in Q2, which will be launched in the third quarter.

Furthermore, there is also synergy potential between food delivery and the retail business in terms of marketing spending. Our team will evaluate the ROI across different marketing channels and boost overall marketing efficiencies.

[Foreign Language]

[Interpreted] Regarding the long-term unit economic improvement, we have noticed the competition start to intensify since July. But we are focusing -- we're currently focusing on improving the platform system and enhancing experience of users, merchants and riders. The UE of food delivery -- of JD Food Delivery is gradually improving.

Moving forward, we don't believe the low-quality competition create any value to the industry. So we're focusing on more refined subsidy strategy tailored to different regions and user group and -- to improve the fulfillment efficiency fueled by economic scale, enhanced system capability collectively to improve the profitability of our food delivery business.

In the long-term, we don't -- we view this business as a long-term business initiative on JD. This is a 5-, 10-, even 20-year initiative. This is not a 1-month -- 1 quarter or 2 quarter kind of business model. So the food delivery business will gradually leverage economic of scale to boost efficiency, and we will continue to unlock the huge synergistic potential between food delivery and core retail business to support the company's long-term healthy growth.

Thank you, Roland.

Your next question comes from Kenneth Fong with UBS.

[Foreign Language]

[Interpreted] My first question is about the investment in new business. Management mentioned that we have a series of new business initiatives to invest in. Can management share about the direction and strategy for this new business investment?

From a financial perspective, how would this affect the revenue growth and our profit targets? And how should we think about the impact, if any, to the shareholder return policy, including dividends and then share repurchase?

And my second question is about the strong growth behind the general merchandise categories. We noticed that these categories have shown a few consecutive quarters of very robust growth. Can management share the drivers behind? And is the sustainability going forward?

[Foreign Language]

[Interpreted] Thank you for your question. Kenny, let me first address your question regarding the JD strategy of -- for New Business initiatives. So within JD, we look at New Business in terms of innovation of business model, adoption of new technology. So as you have observed, JD continues to explore and innovate in new directions with synergistic potential with our current core business.

So in terms of new business model, I can name JD Food Delivery, JD International and -- International business and Jingxi business are the innovation of business model. At the same time, we are boosting innovation by new technology and increasing -- in various business scenarios such as, for example, the adoption of AI across various business scenarios. The example is unmanned logistic equipment and warehouse automation. We believe we are in a great area of technology called development. So JD must fully embrace innovation. We have numerous internal innovation projects, and we are encouraging every team of JD to embody a spirit of innovation.

JD's internal innovation are also centered around supply chain, leveraging our unique supply chain advantage and capability to enhance user experience is always our core focus. This exploration are a natural extension of JD's core business. Both domestically and internationally, we are committed to deepen our presence in the retail market by continuously enhance our existing business capability while exploring on-demand retail and expanding into low-tier markets.

At the same time, as China's largest retailer, international expansion has always been a key strategy for JD, and we aim to build a more efficient global retail network to provide an exceptional shopping experience for consumers worldwide and become a leading global retailer. This is a long-term goal.

We believe that this new business exploration and investment will further strengthen JD supply chain advantage and enhance user experience, driving continued growth in our user base and user engagement. This give us the confidence in achieving a sustainable positive cycle of scale, growth, efficiency improvement and profit increase, steadily progressing towards our long-term profitability goals.

JD track record has repeatedly demonstrated that our commitment to invest in efficiency -- to investment efficiencies, and this will remain unchanged. We always adopt a small step, quick progress kind of approach to explore and drive development of innovative business.

[Foreign Language]

[Interpreted] While we actively explore new business opportunities, we will continue to create value and return to our shareholders. First, in the first half of this year, our total share repurchase valued at about USD 1.5 billion and our current USD 5 billion share repurchase program, the remaining amount was USD 3.5 billion as of the date of this announcement.

Secondly, we have paid out cash dividends to our shareholders for 4 consecutive years. This April, we completed the payment of about USD 1.44 billion annual cash dividend for the year of 2024, and we will continue to do so going forward. We will return to our shareholders through growth, dividends and share buybacks going forward.

Lastly, we will also strengthen our execution on core businesses and proactively take on new growth opportunities. We aim to build a business model for the long-term driving steady, sustainable growth in revenues and profits along the way and sharing our business success with our shareholders.

[Foreign Language]

[Interpreted] Regarding your second question about our general merchandise category, as you have noted, in Q2, the general merchandise revenue growth has recorded 4 consecutive quarter of steady acceleration. The major category, supermarket category, which is the largest contributor to the GM revenue, has maintained a double-digit growth for 6 consecutive quarters. This is primarily due to our team's continuous effort to enhance operational capability over the past 2 years. We believe this will continue to drive the steady growth of our supermarket business.

[Foreign Language]

[Interpreted] So moving forward JD supermarket will continue to enhance in the following areas: The first one is the 1P model, which represents our unique business model and distinctive capability. We can further reduce procurement costs, improve supply chain efficiency and offer better product at a lower price to our user.

Second, we aim to improve user conversion. We have observed initial cross-sell by food delivery user in supermarket category. To embrace the massive traffic generated by food delivery, JD supermarket team will implement refined operational strategy, including optimized product recommendation and marketing campaign to better meet these user needs.

I also want to share some view in term -- to address the on-demand retail opportunity. We maintain strong confidence in JD supermarket operational strength, and we will also aim to seize the opportunity of on-demand retail. We recognize on-demand retail serve as a complementary channel addressing specific urgent needs.

It currently has limitation in product variety and cost effectiveness compared to the traditional B2C e-commerce. In the broader retail market, instant retail remains a relatively small segment. JD supermarket will strategically expand into on-demand retail to fulfill diverse consumption use case, particularly for the time-sensitive categories, but we'll always focus on building the core e-commerce operational capabilities.

We remain confident in the sustained robust growth of our general merchandise category. This year, the growth of this category has been achieved without the impact of trade-in subsidy and is primarily driven by the enhanced capability of our team, positioning this category as a key growth driver for our business going forward.

Your next question comes from Joyce Ju with Bank of America.

[Foreign Language] [Interpreted] I will translate my questions. My first question is on user and traffic trends. Company saw substantial user and traffic growth in the second quarter. Could management share more colors on user profiles, behaviors and retentions and also user growth strategies and targets down to the road?

My second question is on bottom line outlook. How does management budget investment for growth opportunities? And how should we expect margin and profit for the next couple of years and even like in the company's probability trend over the longer term?

[Foreign Language]

[Interpreted] For your first question, in Q2, we saw strong user growth with quarterly active customers and user shopping frequency, both up over 40% year-on-year. This marks the most robust user momentum we have seen in recent years. On one hand, our core retail business has seen improvement in user acquisition and retention, primarily driven by our low price strategy and the platform [ system ] development over the past 2 years. These efforts have enriched our product supplies and enhance the user experience.

Moreover, improvements in user conversion efficiency, coupled with our efforts to create more engaging content and other operational refinements have further supported user attraction and retention on our platform. On the other hand, JD Food Delivery has achieved a rapid growth within less than 6 months of its launch, providing new growth momentum for user traffic, active users and user shopping frequency on JD's platform. Food delivery business has brought in an increasing number of young users and significantly boosted JD Plus member's shopping frequency by over 50% year-on-year in Q2.

We will continue to accelerate cross-selling from food delivery to on-demand retail and B2C e-commerce, including efforts to enhance engagement with existing users and convert new users to our e-commerce offerings, thereby driving rapid growth in JD's overall user base and user shopping frequency.

[Foreign Language]

[Interpreted] Looking at the long-term, JD's goal is to serve the 1 billion e-commerce users in China, as we continue to focus on enhancing user experience, lowering costs and driving greater efficiency. We see great potential for improvement in areas such as user scale, diversified service scenarios, a wider range of products and service offerings and our ability to offer higher-quality services to our users. We have been making strategic investments in these areas to deliver long-term sustainable growth in our user base and user value.

[Foreign Language]

[Interpreted] For your question about profitability, JD's profit margin may fluctuate with industry dynamics and our investment pace in the short-term. However, our long-term goal to achieve high single-digit profit margin remains unchanged, especially the profit margin of our core retail business has been on a very healthy trend.

[Foreign Language]

[Interpreted] The drivers of our core retail profit expansion include: First, increased supply chain efficiency, which has been reducing costs and improving efficiency for both upstream and downstream players along the supply chain and at the same time, driving improvements in our own profits including higher gross margin of product sales as well as logistics cost reductions and efficiency gains.

Second, better profitability across categories. For example, our supermarket category still has a lot of room to improve its margin performance and our well-established categories, such as electronics and home appliances also have a potential for margin improvement.

Third, development of our 3P ecosystem. As the proportion of our 3P business goes up over time, marketplace and marketing revenue will also have rapid growth, which will benefit our margin performance.

[Foreign Language]

[Interpreted] Regarding our thoughts on new business investment, we aim to unlock greater growth potential with the new opportunities. We are confident this will drive long-term growth in users, GMV and profits. The early stage investment will impact JD Group's margin in the short-term. But in the long-term, the New Businesses will gradually evolve into new growth drivers creating greater synergies with our core business and ultimately enhancing our profitability.

In the process, we will also focus on our strategies, invest with discipline and focus on ROI. We will maintain flexibility to balance our efforts and inputs based on actual results.

Thank you, Joyce. Let's take the last question, please.

Your last question comes from Thomas Chong with Jefferies.

[Foreign Language]

[Interpreted] My question is about our overseas expansion. Can management share about -- thoughts about the next few years' strategies as well as the recent deal with CECONOMY, what's the logic behind?

[Foreign Language]

[Interpreted] Thank you, Thomas, for your question. Yes, I have -- as I have mentioned, as the largest retailer in China, international expansion has always been a key strategy for JD. But our international expansion strategy differ notably from other cross-border e-commerce model.

Our international business focus on supply chain capability. So on one hand, we aim to seize the opportunity of a Chinese premium brand going global, helping them efficiently expand into international markets while providing overseas consumers with cost-effective products. On the other hand, JD is also committed to localization, meaning developing local retail and e-commerce business, establishing local teams and workforce, conduct local procurement and local fulfillment, so to build a long-term mutual beneficial relationship with participants in local market.

Moreover, JD will emphasize on selling branded high-quality product. JD has been operating in Europe for 3 years, steadily building our retail e-commerce Property and Logistic warehouse infrastructure, while accumulating extensive experience. So since 2022, we have been piloting innovative retail model in Europe, and we plan to officially launch our retail e-commerce platform called Joybuy later this year, and we will share more updates later on.

Regarding the proposed acquisition of CECONOMY, we believe the European market as well as CECONOMY's brand strength, supply chain capabilities and market position in European market holds significant value for JD and both party can achieve synergetic results. And JD can -- on the other hand, JD can provide online operation expertise and technology know-how. So the transaction is subject to regulatory approval currently, and we will provide a further update as appropriate.

Thank you. So that's the last question.

We are now approaching the end of the conference call. I will now turn the call over to Sean Zhang for closing remarks.

Thank you. Thank you all for joining the call today. If you have further questions, please contact me and IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]